The SALT deduction is going up to $40,000. Here’s how to get the most out of it.

Homeowners now have the chance to write off much more of their state and local tax bills, and this could potentially lead to bigger tax refunds.

That’s if they play their cards right on the SALT deduction, which is increasing to $40,000 from $10,000.

The higher deduction is part of the Republican tax bill that was signed into law over the summer. Like a handful of other new and revamped breaks in the legislation, the higher SALT deduction will only be around for the next few years — but it also applies to 2025 tax returns, which are filed in early 2026.

As year-end tax planning ramps up, the new playbook for using the SALT deduction is coming into view.

The SALT deduction is only available to taxpayers who itemize their deductions rather than claiming the widely used standard deduction, which the tax law increased to $15,750 this year for individuals and to $31,500 for married couples.

Around 90% of taxpayers have opted for the standard deduction in recent years, according to IRS statistics.

The decision on whether to take the standard deduction or itemize hinges on which option results in a bigger deduction. The more generous SALT deduction will complicate that calculation, but the payoff may be worth the effort.

“There’s definitely more planning involved, and I think if people are close, you’ve got to at least compare the two instead of maybe automatically selecting standard deduction on the tax return,” said Stratton Harrison, founder of Vita Wealth Management in Chicago.

Anywhere from 5 million to 7 million more households could be itemizing this year and next year, likely due to the higher SALT deduction, according to projections from the Tax Foundation and the Tax Policy Center.

Here’s how taxpayers can decide what’s best for them.

This year, the full $40,000 SALT deduction is for individuals and married couples who have modified adjusted gross incomes lower than $500,000. For those making more than that, the deduction amount goes down incrementally, back to $10,000 for those making $600,000 or more. From 2026 to 2029, both the deduction and income level at which the phaseout begins increase by 1% yearly, before the deduction drops back to $10,000 for everyone in 2030.

One of Harrison’s client families stands to save approximately $10,000 in taxes this year, thanks to the higher SALT break. They live in the Chicago suburbs, where property taxes are among the highest in the nation, and they earn more than $400,000, which means they incur a sizable state income-tax bill, too.

Harrison noted that the couple has already increased their 401(k) and health savings account contributions as a way to cut their taxable income and ensure they stay under the $500,000 income cap for the SALT deduction. “It kind of just worked out where they were in this sweet spot,” he said.

It underscores a point about the decisions ahead: Several financial factors may have to align in a person’s life before it makes sense to take the SALT deduction. Those include living in a place with higher property-tax bills and paying a lot in state income taxes, due to the tax rates or to income, or some combination of the two.

Some states don’t assess income taxes, but residents may pay high property taxes. In that case, a state sales tax on a big-ticket purchase, like a car, can go toward the SALT break, advisers said. In this economy, it’s more likely that wealthier consumers would be making those bigger purchases. (In addition to property taxes, the IRS lets households claim state and local sales taxes or state and local income taxes for the deduction, but not both.)

The SALT deduction really shows its muscle once households hit the six-figure mark, according to Tax Policy Center estimates.

This year, almost 40% of households making between $200,000 and $500,000 could save nearly $1,200 in taxes with the deduction, while seven in 10 households making between $500,000 and $1 million could reap nearly $4,000 on average.

The tax benefits will likely be concentrated in certain real-estate markets, as well. Top among them may be the New York City metropolitan area and California’s Bay Area, according to one analysis.

Unless they routinely itemize their deductions, SALT-curious taxpayers may want to consider a tactic known as “bunching.”

That involves clustering expenses that count as itemized deductions in one year, taking the standard deduction the next year, and then repeating the process. The key is to think ahead about income and expenses that can be sped up or slowed down.

“Bunching is back, baby!” Matthew Saneholtz, chief investment officer and senior wealth adviser at Tobias Financial Advisors in Plantation, Fla., told MarketWatch. “It’s a really valuable strategy for those that are typically standard-deduction takers,” he said. When “timed right, you can be an itemizer and get more bang for the buck.”

Taxpayers have an array of itemized deductions they can group with their SALT costs in order to get past the standard-deduction amount. There’s the medical-expense deduction and the mortgage-interest deduction — a silver lining for people who have paid higher mortgage rates in recent years, Harrison noted.

Charitable donations may provide the biggest opportunities. Making several charitable donations in one year is a clear-cut way to execute the bunching strategy and maximize the SALT break, Saneholtz and other advisers said.

Suppose a married couple had a $15,000 property-tax bill and $10,000 earmarked for charity in 2025 and 2026, Saneholtz said. In Florida, which doesn’t have an income tax, homeowners can pay this year’s local real-estate taxes as late as the first couple months of 2026, he noted.

By paying $25,000 this year and $25,000 next year, the hypothetical household is still in the standard deduction’s $31,500 payout zone. But what if the couple waited until January 2026 to pay their real-estate taxes and make their charitable donations, bunching $50,000 in deductions for those taxes and donations? At a marginal rate of 24%, Saneholtz said the household would reap $4,272 in tax savings next year.

In other cases, the bunching strategy may work best for people who push up their charitable contributions and state and local tax payments into this year. That’s because the charitable deduction is getting slightly stingier next year for wealthy households that itemize.

For example, John Nowak, founder of Alo Financial Planning in suburban Chicago, has a client who is poised for $48,000 in tax savings this year with a hurry-up approach. When combining the SALT break “with charitable planning, that’s where the value is,” he said.

The strategy of accelerating or slowing SALT expenses hinges on being able to control when payments are made. Not everyone can do that, for logistical and financial reasons.

For one thing, local property-tax bills may run on a range of calendars, deadlines and rules preventing strategically timed payments.

Meanwhile, people who own their home outright may have more leeway on whether to pay their property-tax bill either in late 2025 or early 2026, Nowak noted. It may be more difficult for someone with a mortgage to prepay their real-estate taxes, because their mortgage servicer may pay their local taxes and homeowners insurance through an escrow account.

People who pay their mortgage, insurance and local taxes via a servicer should talk to their servicer to see if those tax payments could be sped up or slowed down, Nowak and others said.

Another trick is timing quarterly estimated payments on a state income-tax bill. These generally may be paid in late 2025 or early 2026, depending on the state. But this tactic may only work for self-employed people and retirees, Nowak noted.

By contrast, wage earners with employers who withhold income taxes from each paycheck may not have that type of flexibility. But there’s still some wiggle room, Nowak said. For example, a worker with a W-2 could sell some stock and, depending on the state, prepay the income tax on the profits.

Yet even if someone can speed up certain payments, it doesn’t always mean they should, Harrison said. He sometimes sees emotion cloud clients’ judgment on tax bills. “Nobody likes paying taxes. They want to make aggressive tax choices sometimes.”

But paying early for future tax savings wouldn’t be worth it if that sacrifices cash flow or liquidity now, he said. “It’s this whole circle of planning,” he said, later adding, “There’s a balance with all this.”