One Big Beautiful Bill Act Revives SALT Deduction Strategy

Tax Payment Bunching is Back

The newly passed One Big Beautiful Bill Act (OBBBA) is stirring up the tax planning world — and for good reasons. Among its sweeping changes, one provision is rekindling an old tax strategy that had all but vanished in recent years: tax payment bunching, especially for those living in high-tax (or even moderately taxed) states.

If you’re a homeowner or high-income earner in states with state income taxes, including Arkansas, this strategy could unlock thousands in tax savings over the next five years.

The Big Change: SALT Deduction Cap Lifted

Under the 2017 Tax Cuts and Jobs Act (TCJA), the state and local tax (SALT) deduction was limited to just $10,000 per year. That meant most homeowners and high earners got little or no benefit from deducting property taxes or state income taxes.

Enter OBBBA.

The new law raises the SALT cap to $40,000 per year — but only for taxpayers earning under $500,000 AGI and only through 2029. This temporary window is your chance to bring back advanced itemizing strategies that were previously shelved.

What Is Tax Payment Bunching?

Bunching is the practice of grouping deductible expenses — like property taxes and state income tax payments — into a single tax year. The goal is to exceed the standard deduction threshold and unlock more itemized deductions, thus lowering your taxable income for that year.

You alternate years:

• One year, you bunch payments and itemize.
• The next year, you take the standard deduction and skip itemizing.

Who Should Consider This Strategy?

Taxpayers who:

• Have AGI between $200,000 and $500,000
• Own a home in a state with income tax
• Pay $12,000–$40,000+ annually in combined state and local taxes
• Are currently not itemizing because of the old $10,000 SALT limit

If that’s you, you may have a golden opportunity to reduce your tax bill by thousands, especially if you pair bunching with other itemized deductions.

How to Execute SALT Bunching

Prepay Property Taxes

Many counties allow you to pay next year’s property tax bill in December of the current year. If you can:

• Pay both 2025 and 2026 taxes in 2025.
• Then skip in 2026 and do it again in 2027.

Accelerate State Income Tax Payments

Make additional estimated state tax payments before December 31 to increase your deduction in your chosen “bunching” year.

Combine With Charitable Giving

Layer in a large charitable donation — or fund a donor-advised fund (DAF) — to further increase your deductions in that same year.

Case Study: Arkansas Couple Using the $40K SALT Deduction Cap

Let’s say we have a married couple in Little Rock, Arkansas with the following financial profile:

• Adjusted Gross Income (AGI): $250,000
• Filing Status: Married Filing Jointly
• Arkansas State Income Tax (2025): ~$10,600
• Property Taxes: ~$4,200/year
• Standard Deduction (2025): $29,200

Breakdown:

Arkansas has a top marginal income tax rate of 4.4% as of 2025. For an AGI of $250,000, their effective state income tax is approximately $10,600 after standard adjustments and deductions.

Their total SALT payments =

• $10,600 (state income tax)
• $4,200 (property tax)
  → Total: $14,800

Without Bunching:

With SALT deductions previously capped at $10,000, this couple had no reason to itemize, since their total deductions were less than the standard deduction.

With Bunching Strategy (under new $40K SALT cap):

Now that the SALT cap is temporarily raised to $40,000, they can bunch their payments to exceed the standard deduction in targeted years:

In 2025:

• Prepay 2026 property taxes in December 2025
  → +$4,200
• Make an additional state tax estimated payment before year-end
  → Push SALT total to $18,000–$20,000

They can combine this with:

Advanced Techniques to Amplify the Strategy

• Family Structuring: Spread ownership or tax payments across family members or trusts to stay under phase-outs.
• Quarterly Payment Timing: Time state tax payments carefully — Q4 estimates due in January can sometimes be paid in December.
• AMT Watch: This strategy only works if you’re not subject to the Alternative Minimum Tax, which disallows SALT deductions.
• Income Management: Consider retirement contributions or deferred income to stay under the $500K AGI cap.

Final Thoughts

The One Big Beautiful Bill Act has reopened a window for smart taxpayers to bring back a powerful tax planning tool. With the SALT deduction cap now at $40,000 for qualifying earners, strategic bunching of state and local taxes can once again yield real tax savings — even for residents of states with moderate tax rates like Arkansas.

This is a limited-time opportunity (2025–2029), and the rules are nuanced — but with the right planning, everyday couples could make a meaningful dent in their federal tax liability.