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Which Places Benefit Most from State and Local Tax Deductions?

2 min readBy: Alan Cole, Tom VanAntwerp

Some of the most substantial deductions in the federal taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. code are the itemized deductionItemized deductions allow individuals to subtract designated expenses from their taxable income and can be claimed in lieu of the standard deduction. Itemized deductions include those for state and local taxes, charitable contributions, and mortgage interest. An estimated 13.7 percent of filers itemized in 2019, most being high-income taxpayers. s for state and local income, sales, and real estate taxAn estate tax is imposed on the net value of an individual’s taxable estate, after any exclusions or credits, at the time of death. The tax is paid by the estate itself before assets are distributed to heirs. es. This map shows the variation, by county, in the amounts of these deductions. The measurement used here is mean deduction amount taken per return: in other words, the total of all of the deductions for state and local taxes, divided by number of returns filed. The results show that the benefits of these deductions vary substantially from county to county.

There are two reasons for this variation. The first is that higher-income taxpayers tend to take larger deductions, and this effect is very strong. People with very high incomes tend to have very high levels of sub-federal taxes paid. This effect is then further magnified by the fact that not everyone takes itemized deductions. Lower-income taxpayers tend to opt for the standard deductionThe standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government. It was nearly doubled for all classes of filers by the 2017 Tax Cuts and Jobs Act (TCJA) as an incentive for taxpayers not to itemize deductions when filing their federal income taxes. instead.

The second, though, is that state and local tax regimes themselves differ substantially. The places that benefit most from this federal deduction tend to have high state and local taxes overall. The ten counties benefiting most from these deductions are all located in four states, ones known to have high tax burdens generally:

Top Ten Counties for State and Local Tax DeductionA tax deduction is a provision that reduces taxable income. A standard deduction is a single deduction at a fixed amount. Itemized deductions are popular among higher-income taxpayers who often have significant deductible expenses, such as state and local taxes paid, mortgage interest, and charitable contributions. s


Average State and Local Deductions Taken

New York County, NY


Westchester County, NY


Fairfield County, CT


Marin County, CA


San Mateo County, CA


Nassau County, NY


Morris County, NJ


Somerset County, NJ


Hunterdon County, NJ


Santa Clara County, CA


These counties all represent the intersection of the two characteristics mentioned above. They have many high-income taxpayers, and they also have high taxes.

Much more average results come from the counties with only one of the two characteristics: high-income counties in low-tax states, or vice versa. Williamson County, Tennessee, for example, has very high incomes but a low tax burden, and therefore takes a deduction of only $2143 per return. Cumberland County, New Jersey, is the opposite: a lower-income county in a high-tax state. It takes a similarly-sized deduction of $2176 per return.

Finally, the counties that are neither very wealthy nor very heavily-taxed come out at the bottom. Many rural counties in Texas, the Dakotas, Alaska, and Tennessee essentially don’t benefit from the deduction at all. It should be noted that for privacy reasons, the IRS excludes data on the deduction entirely if fewer than 20 people in the county take it. Therefore, those counties where $0 is the reported number on this map may actually have a handful of filers taking the deduction.