MW The SALT deduction is now much more generous. Here's how to get the most out of the tax break.

Andrew Keshner

How does the new SALT deduction work? Here's what to know.

A deduction to defray homeowners' state income taxes and local property taxes is getting much more generous, following fierce debate by lawmakers in Washington.

The focus on the write-off is now coming from homeowners deciding if they should use the deduction to their advantage for the first time in years.

The state and local tax deduction, often referred to as SALT, was quadrupled in President Donald Trump's One Big Beautiful Bill Act, which he signed into law on July 4.

The deduction is rising to at least $40,000, from its current $10,000 limit. That amount will increase each year through 2029, and then it will revert to a $10,000 cap. The new law also says only people below certain income limits can claim the full SALT write-off.

The changes come at a time when property taxes are rising sharply, creating a pain point for many homeowners. Other parts of the sweeping bill may limit what states can do to take the sting from higher local property taxes. The more generous SALT deduction is a temporary victory for homeowners living in states with heavy tax burdens - as long as they can make the best of the new rules.

"To the average Joe that pays a certain amount of property tax, it's going to be really important and it's going to change their deduction strategy," said Leo Varner, a managing director at UHY who leads the consulting firm's SALT practice. "It adds some complexity you have to consider," he said.

Homeowners will have to think hard about whether the expanded write-off is worth it for them, and they'll have to start learning fast: These new SALT rules apply to 2025 income taxes, which households will file in early 2026.

See also: Want to challenge your property-tax bill? Here's the smart way to do it - and how much you could save.

Time to itemize again? Higher SALT caps change the strategy.

To take the SALT write-off, taxpayers have to itemize their deductions instead of taking the standard deduction. When deciding which way to go, it's a matter of seeing which amount is bigger: the across-the-board standard deduction, or the itemized deduction that's a sum of various expenses.

The 2017 tax cuts that lowered the SALT deduction to $10,000 also doubled the standard deduction. Around 10% of taxpayers itemize now, and they are usually wealthy.

The new law hikes the widely used standard deduction to $31,500 for a married couple and $15,750 for a single filer in 2025. It rises with inflation going forward.

In the game of itemizing versus taking the standard deduction, possible SALT filers are now getting more space to run up the score on their state and local taxes. There are plenty of taxes they can tally.

Homeowners paid an average $4,172 in local property taxes last year, according to one count, and the numbers are far higher in some places. New Jersey homeowners paid an average $10,135 in property-tax bills in addition to their state income-tax bills last year, according to ATTOM.

There's no state income tax in Texas, but people in one county near Austin paid almost $29,000 in property taxes, the real-estate analytics firm noted.

Even after tallying state and local taxes, taking the standard deduction may look like the better route. But now that the SALT cap is bigger, there's a smaller gap to fill with other deductions, which could make itemizing more alluring.

Charitable contributions, home-mortgage interest and medical expenses are several other expenses that are eligible for itemized deductions. Private mortgage-insurance costs will also count as an itemized deduction beginning in 2026.

Andy Phillips, vice president at H&R Block's $(HRB)$ Tax Institute, expects more people to start itemizing because of the more generous SALT deduction. "Taxpayers will want to reevaluate their situation with these changes, especially those that were affected by the SALT limit in prior years," he said.

If a taxpayer's SALT expenses still do not justify them itemizing, the remaining gap is smaller for single filers than for married couples filing jointly, said Richard Pon, a San Francisco-based tax and financial-planning expert with tech-sector clientele.

This year, an individual has a $40,000 maximum on SALT and a $15,750 standard deduction. A married couple filing jointly gets the same $40,000 maximum, but a $31,500 standard deduction.

The SALT deduction is commonly seen as a break for homeowners. Yet under the new rules, single renters who pay a lot of state income tax may also win, Pon noted.

He's asked clients who rent and have previously taken the standard deduction to pay attention in the coming months. He wants them to track their cash and noncash charitable contributions to see if itemizing could be worthwhile for them. They should also keep tabs on what they've paid in state-level expenses like vehicle license fees, which count as a state-level expense covered by SALT.

Sales taxes can count as eligible for the SALT deduction, Varner added. It's not worth keeping receipts on small everyday items, but sales taxes paid on big-ticket purchases can build up a deduction, he said.

If you're getting too close to the income limit, think about your retirement accounts

There was no limit for how much a household could heap onto their SALT deduction until the 2017 Trump tax cuts capped it at $10,000. The 2017 rules had no income ceilings.

Now the 2025 law is introducing income limits - like it's doing with a lot of the new tax cuts.

For SALT, the full deduction this year applies to individuals and married couples who make under $500,000, or $250,000 for married couples filing separately. After that, the deduction's value phases out. This year, a joint return with modified adjusted gross income over $600,000 will get the the minimum $10,000 deduction, Phillips said.

These income limits drift higher through 2029 as the deduction size increases.

Households around the top of those income limits will have to strategize, said Kelly Gillette, a partner at Armanino. "Anytime you get phaseouts, you have planning opportunities and risks," she said.

One move is paying attention to the timing of when you receive income, she noted. For example, pushing sales proceeds or the receipt of a bonus into 2026 would keep your 2025 income lower. The so-called bunching strategy for charitable contributions aims to make the most of the charitable deduction in one year.

Another strategy is prepaying a portion of 2026 property taxes in late 2025 to rack up a bigger SALT write-off, Gillette added. Doing that may get tricky if a homeowner's mortgage servicer pays their property taxes from an escrow account, she said, and people should coordinate with their servicer if that's a tactic they want to pursue.

A business owner with the ability to time when they get paid has more wiggle room compared to someone making a lot in wages, said Pon. But W-2 earners have ways to control income, too.

The top ways would be increasing 401(k) contributions or pouring more into a health-savings account if someone has one, he said. IRA contributions may also be deductible. Another option is strategically selling capital investments at a loss to lower income by up to $3,000.

Be on watch for bigger state and local tax bills

The new tax and spending bill is pushing more costs onto state governments for programs like Medicaid and the Supplemental Nutrition Assistance Program.

Homeowners should watch for a possible cascade effect that could affect their property-tax bills, according to Kim Rueben, senior advisor at the Lincoln Institute of Land Policy. If more state money gets tied to social-safety-net expenses, that may mean less money for rebates and credits on local property taxes, she said.

It's a bitter pill during a new iteration of a "property-tax revolt," when homeowners across the country are increasingly grumpy about higher assessments and property-tax bills.

State and local governments might be tempted to hike taxes, knowing residents will have a larger ability to deduct these costs at the federal level, Rueben said. But some of these officials may shy away from more tax hikes, well aware of taxpayers' ire.

"Think about the potential revolt we are seeing," said Rueben. "I'm not sure that's going to subside just because the higher SALT cap is back."

-Andrew Keshner

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July 09, 2025 17:45 ET (21:45 GMT)

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