Holiday Tax Magic for 2026: How to Use the New SALT Window, Supercharge HSAs, and Avoid Costly Timing Mistakes

Most tax mistakes aren’t “illegal.” They’re just poorly timed… or you take advice from the “gurus” on TikTok. One is obviously worse than the other (hint, hint), but they generally generate the same outcome.

Issues are often triggered by one big move at the wrong moment. Whether it’s a stock sale, a Roth conversion, an unexpected bonus, a business distribution, or a property sale. And suddenly — you didn’t just pay tax. You accidentally kicked yourself out of a deduction you could have qualified for with a little planning.

The 2026 tax landscape is full of these “invisible trap doors.” There are real opportunities, but the wins go to the people who understand timing, thresholds, and how deductions phase out.

Let’s start with the one that will impact a huge number of homeowners and high earners.

The New $40,000 SALT Window and Who Actually Gets It

For years, state and local taxes have felt like the tax code’s version of insult-to-injury. You pay the property tax and the state income tax. For once, you’re doing the responsible adult thing. Then the federal return basically says, “Cool story.”

That changes, at least for a window of time.

The SALT cap is increased to $40,000 for those who itemize. That means if you’re already a homeowner in a higher-tax area and you normally itemize, you may finally be able to deduct more of what you’re actually paying.

But this is not a “free for all.”

First: it generally helps itemizers, not standard deduction filers. If you take the standard deduction, this doesn’t move the needle for you the way you want it to.

Second: there’s an income phaseout. And this is where the trap doors show up. The benefit begins to phase out around the $500,000 modified AGI range and is fully phased out by about $600,000 modified AGI.

So the SALT change is real, but it comes with a very specific message from Congress that reads like this in plain English for those who qualify: “We’ll give you a bigger deduction, but only if you don’t spike your income in a single year.”

SALT Timing: The “Two-Year Split” That Saves Deductions

If your income is normally under that phaseout range, you may not need to do anything fancy. You just benefit.

But if you’re near the cliff, one-time income events can push you over.

Common culprits include a business sale, a large capital gain, big RSU vesting, a chunky Roth conversion, or pulling a large IRA distribution in the same year you already had a strong business year. If you are close to that $500K–$600K zone, the smartest move is often boring.

Split income across two tax years… sometimes it’s as simple as a December/January split where income is received in two different calendar years. Other times it’s spreading a transaction, spreading a conversion, or structuring timing of bonuses and distributions in a way that keeps you from accidentally blowing up the deduction.

It’s not always possible. But when it is, it’s one of the highest ROI planning conversations you can have.

SALT Payment Strategy: What You Can Pay, When You Can Pay It, and What Not to Do

Another lever is the timing of taxes you pay.

Property taxes and state estimates can sometimes be accelerated into a year where you can actually benefit from the higher cap. That means you may choose to pay certain assessed taxes before year-end to maximize the deduction in the year it helps you most.

Key word there is assessed.

Trying to “prepay” taxes that aren’t assessed yet can backfire. The IRS has historically been unfriendly toward attempts to deduct payments that are essentially deposits or prepayments with no formal assessment behind them.

So the mindset isn’t “pay everything early.” It’s “pay what is properly assessed early if it helps you in the year you’re itemizing and not phased out.”

The Pro-Level SALT Workaround Most Business Owners Miss

If you own a pass-through business, there’s an additional angle that can matter a lot.

In many states, there are entity-level state tax elections (often referred to as pass-through entity tax elections). When used correctly, these can allow state taxes to be deducted at the business level rather than being trapped under the personal SALT cap limitations.

This can be a massive lever for owners who are high income and routinely capped or phased out on the personal side.

This is not DIY territory. It’s one of those “small checkbox, big consequences” items that needs to be evaluated with your tax strategist because the benefit depends on your state rules, your entity type, and the way credits flow back onto your personal return.

But if you’re a business owner in a state with the right structure available, this is often where the real SALT relief lives.

Now that we’ve covered the homeowner deduction that gets the headlines, let’s move to the deduction strategy that is quietly one of the most powerful tools in the entire tax code.

HSA First, FSA Second: The Health Accounts That Can Change Your Tax Bill

If you’re eligible for an HSA, it’s still one of the cleanest tax advantages in America.

It’s what I call the triple win.

You get a deduction when you contribute. The account grows tax-free. And if you use the money for qualified medical expenses, withdrawals are tax-free.

That’s not a deduction. That’s a tax escape hatch.

For 2026, the HSA contribution limits increase again, and if you’re age 55 or older, you can usually add a catch-up contribution on top of the base limits.

But the bigger story isn’t just the contribution number.

The bigger story is what HSAs can now cover more cleanly, including certain direct primary care or concierge-style arrangements, and expanded access to telehealth without wrecking eligibility, as long as you’re covered by a qualifying high deductible health plan.

In plain English, it means the HSA may become usable for more real-world healthcare spending in a way many people couldn’t take advantage of before.

The HSA Eligibility Checklist That Saves People From Embarrassing Mistakes

Here’s where people get tripped up.

You don’t get an HSA just because you want one.

You need to be covered by an HSA-eligible high deductible health plan. And certain coverage situations can disqualify you, including being claimed as a dependent or being on Medicare.

Before you get excited and start funding the account, confirm eligibility. Every year I see someone overfund because they assumed their plan qualified. The fix is annoying. The paperwork is annoying. The “why did I do this to myself” feeling is also annoying.

Do the quick check first. You can start by reading the IRS rules.

How an HSA Becomes a Retirement Account Without Calling It a Retirement Account

Here’s the part high-income people love.

If you pay medical costs out of pocket today and keep your receipts, you can often reimburse yourself later from the HSA. Not next week. Later later.

That means you can let the HSA grow while you keep a record of eligible expenses you’ve paid over time. Then you can reimburse yourself in the future if you want the cash. So you’re building a tax-free bucket that can be used for healthcare, and potentially treated like a stealth retirement resource later.

And after age 65, if you withdraw funds for non-medical reasons, it generally behaves more like a traditional retirement account where the withdrawal is taxable, but penalties change.

This is why the HSA is not just a “health account.” It’s a strategy account.

Where FSAs Still Win and Why They Belong in the Same Conversation

FSAs don’t get the same love because they’re not as flexible.

A traditional healthcare FSA is typically use-it-or-lose-it, though many plans allow either a limited carryover or a grace period. The rules depend on your employer plan.

But FSAs can still be powerful when you know you’ll spend the money. If you have predictable healthcare costs, prescriptions, orthodontics, or recurring expenses, an FSA can reduce taxable income and improve cash flow.

Think of it like this: HSA is the long-term tax monster while the FSA is the short-term tax lever.

For some households, the ideal approach is using both, but only if you understand your plan options and you don’t accidentally break HSA eligibility by choosing incompatible coverage.

Quick Note: Your 2026 Standard Deduction and Bracket Context Matters

Before I go any deeper, I want you to read my prior breakdown on the updated 2026 deduction landscape, because it changes how you evaluate everything above.

If you’re itemizing, SALT matters. A lot! But, if you’re taking the standard deduction, SALT may be irrelevant, but other strategies become more important.

I recently published an article on the 2026 updated deductions, retirement limits, and tax brackets — and it matters because those numbers are the foundation. Get them wrong, and every “strategy” after that is just guessing. You can read it >> HERE <<

Now, back to the rest of the 2026 landscape.

Charitable Giving Changes: Easy Wins, Annoying Floors, and Smart Timing

Charitable giving is one of the most common “feel-good, plan-bad” areas I see.

People give consistently, which is admirable, then realize later they gave in the least tax-efficient way possible.

For 2026, charitable rules include changes that can help non-itemizers and add floors or limitations for itemizers, depending on how the final rules apply to your situation.

If you are not itemizing, there may be a limited above-the-line deduction for cash gifts to qualifying public charities. That’s meaningful because it gives non-itemizers a tax reason to give, not just a moral one.

If you are itemizing, the story can include floors where a small portion of giving may not count until you exceed a threshold, plus limitations on the value of the deduction at the top bracket.

This is where timing becomes a weapon.

If you anticipate bigger restrictions in 2026 and you already know you want to give meaningfully, one strategy is to bunch charitable giving into a year where it produces the best result.

The Senior Deduction Boost and Why Income Timing Matters Even More After 65

If you’re 65 or older, there are enhanced deduction benefits that can meaningfully reduce taxable income even if you don’t itemize.

But there are income phaseouts. That means the exact same theme we talked about with SALT shows up again.

One big income spike can reduce or eliminate a benefit you otherwise would have qualified for. The usual suspects apply here too.

• Large Roth conversions in a single year.
• Big IRA withdrawals stacked on top of capital gains.
• Selling a property and recognizing a big gain in the same year you’re trying to qualify for a senior benefit.

If you’re near a phaseout band, the strategy is rarely “don’t do it.” It’s “don’t do it all at once.”

Spread conversions over multiple years. Split gains when possible. Avoid stacking multiple taxable events into the same calendar year unless you’ve modeled the outcome first.

Business Owner Provisions: Rates, QBI, and the Return of Big Write-Off Years

There are a few “macro” items that matter for business owners because they stabilize planning.

• If individual rate snapbacks are avoided, that reduces the urgency-driven panic planning that happens when brackets are scheduled to jump.
  
• If QBI is extended or made more permanent, pass-through owners keep access to the 20% qualified business income deduction beyond the prior uncertainty window.
  
• And if 100% bonus depreciation is restored for eligible assets, it reopens a major lever for businesses making equipment purchases, improvements, and certain property-related investments.

This is where I’ll say something unpopular. Bonus depreciation is amazing, but it’s not “free money.” It’s timing.

You’re choosing to accelerate deductions into the current year. That’s often smart, especially in high-income years, but it should be paired with clean documentation and a plan for what happens in future years when the depreciation is already used up.

If you’re doing real estate and using cost segregation, the same idea applies, but louder. The deduction can be huge. The audit defense needs to be real. Do it right, keep the workpapers, and don’t treat engineering-based deductions like a casual TikTok hack.

Estate Exemptions: Bigger Headroom, But Don’t Forget State Traps

Higher federal estate exemptions can create more breathing room for many families.

But the mistake I see is people assuming federal rules are the only rules. Some states have estate or inheritance thresholds that are far lower than the federal level.

So even if you’re nowhere near federal estate tax, you may still have state-level exposure depending on where you live, where you own property, and how your assets are titled.

If your documents were built around older exemption numbers, it’s worth reviewing them to make sure complexity still matches your goals. Sometimes the plan is still perfect. Sometimes you’re maintaining a legal origami project that no longer fits the current landscape.

The Only Real “Theme” of 2026 Tax Planning: Don’t Stack Income Without a Model

If you remember nothing else, remember this.

2026 rewards timing. The deductions and benefits are real, but they come with thresholds and phaseouts that punish one-year income spikes.

So the game is not to find loopholes. The game is “control the order of operations.”

• Use the SALT window in the years you can benefit.
• Use the HSA the way high-income people should be using it.
• Be intentional with charitable timing.
• Don’t let one big move wipe out deductions you qualify for.

And if you’re a business owner, make sure the entity-level strategies and depreciation levers are integrated into a real plan, not a collection of random tactics.

If you want help modeling what your 2026 tax year could look like before it happens, book a strategy session here.

Welcome to the New Age of Accounting. Let’s begin.

P.S. If you found this article helpful, you’ll love my new book S-Corp Mastery: How Smart Business Owners Maximize Tax Savings & Build a Lasting Legacy. It’s now live and available in a sleek, easy-to-read PDF version. Grab your copy here