Top 5 Tax Changes to Watch for in 2026: What Every Encinitas Filer Needs to Know

Tax Planning for 2026: Key Changes You Need to Know

Tax planning for 2026 is becoming a necessity as tax laws are changing rapidly. The One Big Beautiful Bill Act (OBBB) introduced many significant changes to the U.S. tax code. Some of these changes are beneficial, while others may come as a surprise. At Cardiff Tax Pros, we've broken down the top five changes to watch out for, along with potential steps you can take in 2026 to capitalize on them.

Do you own rental properties? Then there's more good news, check it out here.

1. The SALT Deduction Limit Has Been Raised to $40,000

The change was made in the law: The SALT deduction limit is now raised to $40,000 for married couples filing jointly ($20,000 for single filers), as part of the OBBB.

Why does this matter to Encinitas taxpayers: With California having high income tax rates and property tax rates, increasing the SALT cap allows you to claim more of your state and local taxes as a deduction on your federal return. This could potentially reduce your federal tax liability.

Encinitas taxpayer action step: Coordinate your state estimated tax payments and San Diego County property taxes so they fall within 2026. If you have been holding back on itemizing, it may be time to start again.

2. New Deductions for Tipped and Overtime Income

New deductions were created in the OBBB: You can exclude up to $25,000 in tips and between $12,500 and $25,000 in overtime wages from taxable income.

Why does this matter to Encinitas service industry employees: Many residents work in the service industry (restaurants, salons, retail, etc.) and depend on tips and overtime for their livelihood. The OBBB creates a new way to reduce your taxable income.

Encinitas employee action step: Use a tip tracking app or spreadsheet to document tips and extra hours worked. Keep your pay stubs and records. Bring this documentation when you meet with your tax preparer.

3. Increased Standard Deduction Amounts

New standard deduction amounts:

Married Couples Jointly: $32,20

Single Filers: $16,10

Head of Household: $24,15

Why does this matter to Encinitas homeowners: If you do not have enough itemized deductions to exceed the above amounts, claiming the standard deduction will simplify your return. However, since the SALT limit has been raised, itemizing your deductions may become worthwhile again if you have a mortgage and sufficient other itemized deductions.

Encinitas homeowner action step: Review your mortgage interest, property taxes, and charitable contributions. If you are near the thresholds, "bunch" all possible deductions into 2026 to itemize.

4. An Additional Senior Deduction

Additional senior deduction in the OBBB: Depending on income, seniors aged 65 and older may now deduct an additional $6,000.

Why does this matter to Encinitas retirees: Encinitas is a popular location for retirees. This additional deduction reduces your taxable income for seniors receiving pension, Social Security, or investment income.

Encinitas retiree action step: If you or your spouse turns 65 in 2026, incorporate this into your overall tax strategy. Additionally, if you plan to have large medical bills in 2026, coordinate these with the senior deduction to maximize benefits.

5. Return of the Above-the-Line Charitable Donation Deduction

Above-the-line charitable donation deduction returns under the OBBB: For non-itemizers, cash donations up to $1,000 (single) or $2,000 (jointly married filing) are deductible.

Why does this matter to Encinitas philanthropists: If you support local Encinitas organizations, schools, or charities, you can now deduct these donations regardless of whether you itemize.

Encinitas donor action step: Document all donations made to Encinitas churches, community centers, and registered charities digitally or in writing. If you normally donate, consider donating more in 2026 to get the maximum deduction.

Additional Considerations for Tax Planning in 2026

Tax planning is not just about knowing the changes; it’s also about how to implement strategies effectively. Here are some additional considerations to keep in mind as you prepare for 2026.

Understanding Your Tax Bracket

Knowing your tax bracket can help you make informed decisions about your income and deductions. It’s essential to understand how much of your income will be taxed at different rates. This knowledge can guide your decisions on when to take income, how much to save, and what deductions to prioritize.

Retirement Contributions

Maximizing your retirement contributions can significantly impact your tax situation. Contributions to accounts like 401(k)s and IRAs can lower your taxable income. Consider increasing your contributions in 2026 to take advantage of tax benefits while saving for your future.

Health Savings Accounts (HSAs)

If you have a high-deductible health plan, consider contributing to a Health Savings Account (HSA). Contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free. This can be a valuable tool for managing healthcare costs while reducing your taxable income.

Tax Credits

Don’t overlook tax credits, which can directly reduce your tax liability. Research available credits for education, energy efficiency, and other areas that may apply to your situation. These can provide significant savings and should be factored into your tax planning.

Consult a Tax Professional

Navigating the complexities of tax law can be challenging. Consulting a tax professional can provide personalized advice tailored to your financial situation. They can help you understand the implications of the OBBB and other tax changes, ensuring you make informed decisions.

Need more personalized tips?

Cardiff Tax Pros assists individuals and families in Encinitas, Carlsbad, Solana Beach, and surrounding areas in staying ahead of tax law changes and avoiding surprises. Do you need customized tax planning? Contact us by email at info@cardifftax.com or by scheduling a consultation. Let us help you make 2026 your best tax year ever.