The Treasury’s Latest Tax Advice Doesn’t Suit Every Homeowner, Experts Warn

With the 2025 tax season now in the rearview mirror for many Americans, it's time to look ahead to maximizing your return for 2026. With lots of new tax changes on the books as a result of the One Big, Beautiful Bill, some officials, including Treasury Secretary Scott Bessent, are already passing out advice to taxpayers.

During a recent White House press briefing, Bessent said workers should update their withholdings for 2026 to get "an automatic real wage increase … and you will be able to keep more of your money this calendar year."

Despite this advice coming from a U.S. government official, it shouldn't be taken at face value—especially by homeowners, whose situation may be different from those taking the standard deduction.

What withholding actually means

When you receive a paycheck, your employer automatically holds back a portion for federal taxes. At year-end, if too much was held back, you get a refund; too little, and you owe the IRS.

Bessent's advice is rooted in the fact that refunds are running higher than usual this year. As of early April, the average individual refund was $3,462—up from $3,116 at the same point last year, according to IRS data.

That gap exists largely because the IRS didn't update employer withholding tables after Trump's One Big, Beautiful Bill introduced new deductions. The result: Many employers are still withholding at the old, higher rate.

The logic behind Bessent's suggestion is sound in theory. If you're getting a large refund, you've essentially been giving the government an interest-free loan all year. Adjusting your W-4 to withhold less means more money in your pocket each pay period rather than a lump sum the following spring.

But for homeowners, it's not that simple.

Why homeowners need to think twice

"Telling every worker to reduce their withholding is the financial equivalent of telling everyone to take the same dose of medicine," said Douglas Boneparth, certified financial planner and president of Bone Fide Wealth in New York. "It might help some people, but for homeowners with more complex tax pictures, it's a fast track to a surprise bill in April."

The reason comes down to how homeowners file. Standard-deduction filers have a relatively predictable situation—wages in, flat deduction out. But homeowners who itemize are working with multiple moving parts: mortgage interest, property taxes, state income taxes, charitable giving. Any of those can shift year to year.

"A refi, a property tax reassessment, a year with more or less giving—all of it changes what you owe," Boneparth said. "If you reduce your withholding based on last year's deductions and this year's numbers come in lower, you are underpaid and you owe the difference. Possibly with a penalty on top."

The SALT expansion changes the math

The One Big, Beautiful Bill raised the SALT deduction cap from $10,000 to $40,400 for 2026, with a phaseout beginning at $505,000 of modified adjusted gross income. For homeowners in high-tax states like New Jersey and California, that's a significant shift.

Consider a family in New Jersey paying $18,000 in property taxes and $15,000 in state income taxes—$33,000 in combined SALT. Under the old cap, only $10,000 of that was deductible. Under the new rules, the full amount may be, generating thousands of dollars in additional federal deductions that their current paycheck withholding doesn't reflect.

"For a lot of homeowners who were previously capped out at $10,000 and taking the standard deduction as a result, itemizing is now back on the table," Boneparth said. "That is a good thing for your tax bill, but it also means your withholding math from prior years is stale."

Homeowners near the $505,000 phaseout threshold should be especially cautious, he added, since the SALT benefit can shrink quickly as income rises.

How to adjust your withholding

Rather than following a blanket directive, experts recommend a more precise approach.

"Almost nobody fills out Step 4(b) on the W-4, but that's exactly where homeowners should focus," said George Dimov, certified public accountant and founder of Dimov Tax. Step 4(b) is where filers can enter the amount by which their itemized deductions exceed the standard deduction, allowing the payroll system to calculate withholding correctly. "If you don't do this, you are just guessing," Dimov said.

For a practical starting point, Boneparth recommends pulling your 2025 tax return before touching your W-4. Look at line 24—your total federal tax liability. If your 2026 income and deductions are roughly similar, your liability should be too. From there, the IRS' free Tax Withholding Estimator at irs.gov can walk you through an updated W-4 that accounts for itemized deductions in a way a gut adjustment won't.

Homeowners who refinanced, moved, or had a significant change in property taxes should assume their prior withholding is wrong until they've verified otherwise. And those with variable income from bonuses or equity compensation should build in a cushion—underwithholding can trigger a penalty if you fall below the IRS safe harbor, generally 100% of last year's tax liability, or 110% if your AGI exceeded $150,000.

Bessent's advice isn't wrong, exactly—but it's incomplete. For homeowners navigating mortgage interest deductions, property taxes, and a newly expanded SALT cap, the withholding calculation isn’t automatic.

As Boneparth puts it: "More take-home pay now is only a win if the math actually works out in April. For homeowners, the math is more complicated, and the expanded SALT cap has changed it again. Run the numbers before you change the paperwork."