Drake Tax - Schedule A - State and Local Income Tax Deduction Limitation (Wks SALT)

Article #: 15833

Last Updated: December 17, 2025

 

Tags: Drake Tax

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Note  This article comprises former KB articles 11084 and 15833 It is herein referred to as KB 15833.

SALT Limitation

As a general rule, prepaid state and local income taxes for a future year are not deductible on the prior-year federal return simply to accelerate a deduction.

For real property tax, a prepayment may be deductible in the prior year only if:

  • The payment is made in the prior year, and

  • The property tax has been assessed (imposed under local law) before the start of the current year.

Watch the video SALT Limitation for a demonstration.

In Drake Tax, if the cumulative amount entered for real estate taxes, personal property taxes, state and local income taxes, and sales tax exceeds the limit, worksheet Wks SALT is generated to show the total paid vs. the allowed amount for each tax paid. Only the lesser of the total taxes paid or SALT cap amount (varies depending on tax year) will flow to Schedule A, line 5e. The worksheet shows how much of each tax is being carried to the Schedule A, line 5e for your records. Since some states may have different allowable amounts, this worksheet is also used to maintain the breakdown of amounts for that purpose.

Caution  In some circumstances, the sales tax will be deducted instead of the income taxes because this will usually result in a more beneficial deduction when considering the tax-ability of the refund for next year. As the Wks SALT states in this circumstance:

If state income taxes are deducted on Schedule A, and then a state issues a refund of some or all of those taxes, the refund may have to be reported as income in the following year. The program has chosen to deduct sales tax instead of income tax, even though the income tax is higher, so that no state refunds will be taxable on next year's return. Mark the Force income tax check box on screen A, line 5 to force the income taxes to be deducted instead of the sales taxes, if that results in a benefit to the taxpayer on a state return.

Note  Sales tax is not deductible on Form 8960

Due to the new tax bill signed in 2025, the SALT deduction cap has been increased to $40,000 ($20,000 if Married Filing Separately).

The cap begins to phase out when the MAGI exceeds $500,000 ($250,000 MFS); but not below $10,000 ($5,000 MFS). SALT limit is reduced by 30% of the amount by which MAGI exceeds the threshold.

Under the guidelines from the TCJA, the deduction for state and local income and property taxes is limited to one total combined deduction of $10,000 ($5,000 if Married Filing Separately).

Income

The Wks STAX page in View/Print mode uses the gross income from such sources as the SSA and 1099-R screens, not the taxable income. What the taxpayer had available to spend is relevant to sales tax, rather than the taxable income.

To force the worksheet to print, use the check box on the STAX screen > Print the General Sales Tax Worksheet.

Drake Tax - Schedule A - Force Itemized or Standard Deduction

Note  This new tax bill, was signed into law on July 4, 2025. The One Big Beautiful Bill Act (OBBB or OB3) is now also being referred to by lawmakers as the Working Families Tax Cut Act. You may see one or both names used, but they refer to the same set of tax changes.