Once the $10,000 cap is applied on state deduction, it is suggested to take the credit rather than deduction to accurately reflect the deduction at the state level cap is accurately reflected. An example is Mississippi below:
Itemized Deductions - Taxes Paid to the State
Taxes Paid Lines 3a through 3c: Taxes Paid State income taxes paid or any other taxes allowed in lieu of federal purposes including withholding taxes on Mississippi gaming winnings, are not deductible as an itemized deduction. These amounts should be subtracted on line 3b. Also, you cannot deduct federal income tax or Social Security tax. Enter the amounts from Federal Form 1040, Schedule A (Section 27-7- 17(3)(a)(i)). Note: Per the Tax Cuts and Jobs Act, there is a $10,000 limitation ($5,000 if married filing separately) on this deduction.
