Updated for the 2026 tax year
Key points
A deduction saves tax at your marginal rate. A $1,000 deduction in the 35% bracket saves about $350, so spend money only on things you need anyway.
New for 2026: Roth-only catch-ups for higher-paid employees, a 0.5% floor on charitable deductions for itemizers, and a new overall limit on itemized deductions.
The 2026 SALT cap is $40,400 for most filers, which can make itemizing worthwhile again for Texas homeowners with high property taxes.
A large tax bill is a reason to review retirement contributions, health savings accounts, deductions and business decisions. It is not a reason to buy a strategy that promises to eliminate the bill. The One Big Beautiful Bill Act, signed in July 2025, changed several rules for 2026.
Know what a deduction saves
Your marginal income tax rate applies to your next dollar of ordinary taxable income. In 2026, the 35% bracket starts above $256,225 for single filers and $512,450 for married couples filing jointly. The 37% bracket starts above $640,600 and $768,700, respectively.
A $1,000 deduction within the 35% bracket can save about $350 in federal income tax, before other tax interactions. Spending $1,000 solely to save $350 still leaves you with less cash.
Texas has no individual state income tax, but residents can owe income tax elsewhere. Business taxes, including possible Texas franchise tax, are separate.
Review retirement contributions before payroll closes
For 2026, the regular employee deferral limit for a 401(k), 403(b) or governmental 457(b) plan is $24,500. The usual age-50 catch-up is $8,000. For participants turning 60, 61, 62 or 63 in 2026, the higher catch-up is $11,250 if the plan permits it.
Pre-tax contributions reduce current taxable income. Roth contributions do not. Beginning in 2026, affected employees with more than $150,000 of prior-year wages from the sponsoring employer must make catch-up contributions on a Roth basis. Do not count those catch-ups as a current-year deduction.
If your employer offers a 457(b) alongside another plan, ask the administrator how the limits interact. Not every limit doubles.
If your income is too high for direct Roth IRA contributions, our plain-English guide to the 2026 backdoor Roth IRA explains the pro-rata rule and deadlines.
Use an HSA only if you qualify
The 2026 health savings account contribution limits are $4,400 for self-only coverage and $8,750 for family coverage, with a $1,000 catch-up for eligible people age 55 or older. Employer contributions count toward the limit.
An eligible HSA can provide a deduction or income exclusion for contributions, tax-deferred growth and tax-free withdrawals for qualified medical expenses. A qualifying high-deductible health plan is part of eligibility, but other coverage, Medicare enrollment, dependent status and the months you qualify also matter.
Revisit SALT and charitable deductions
For 2026, the state and local tax deduction cap is $40,400 for most filers. It falls by 30% of modified adjusted gross income above $505,000, but not below $10,000. Married-filing-separately figures are half. The higher cap returns to $10,000 after 2029 under current law.
For a Texas couple, eligible property taxes and state sales taxes may be relevant. A couple with $14,000 of deductible property taxes and $3,000 of deductible sales taxes could count $17,000 before other limits, rather than the former $10,000 cap. Whether itemizing helps depends on the rest of their deductions; the 2026 joint standard deduction is $32,200.
Two other changes start in 2026. Itemizers generally deduct charitable gifts only above 0.5% of their contribution base, usually adjusted gross income. Nonitemizers have a separate limited deduction for eligible cash gifts, up to $1,000 or $2,000 on a joint return.
A new overall itemized-deduction limit also applies. The reduction is 2/37 of the lesser of your otherwise allowable itemized deductions or the amount by which taxable income, calculated before this limit and increased by those deductions, exceeds the start of the 37% bracket. That add-back matters: the rule can apply even if your final taxable income is below the top bracket.
Combining planned gifts into one year may help with the charitable floor and itemization. It does not automatically remove the separate overall limit.
Business owners have additional decisions
The QBI deduction can be up to 20% of qualifying business income, subject to limits. In 2026, restrictions begin above taxable income of $201,750 for single filers and $403,500 for joint filers. For specified service businesses, including many healthcare practices, the deduction phases out completely above $276,750 and $553,500, respectively. Employee wages do not become QBI merely because you work in healthcare.
Qualifying equipment acquired and placed in service after January 19, 2025 may qualify for 100% bonus depreciation. The 2026 Section 179 limit is $2,560,000, subject to its own restrictions. Buy equipment because the business needs it and can afford it, then evaluate the deduction.
A SEP or solo 401(k) may help with business income. The 2026 annual-additions ceiling is $72,000, but compensation, employees and plan-aggregation rules matter. For self-employed owners, a 25% SEP plan rate generally becomes 20% of net earnings after the deductible part of self-employment tax, not 25% of Schedule C profit. More complex plans need specialist design and funding commitments. Get an independent review of any proposal that promises to erase your tax bill before signing or funding it.
Review your 2026 numbers before year end
Asante Tax & Consulting helps business owners across the Houston area connect tax planning with cash flow and the decisions ahead. Book a free 15-minute tax planning call to review your 2026 numbers before year end.
General information only. Eligibility and deduction limits depend on your circumstances. Confirm the treatment before committing money or changing a plan.
