The 2026 Mid-Year Check-In: Aligning Your Lifestyle with New Tax Realities

The One Big Beautiful Bill Act passed in 2025 brought some of the most significant changes to the tax code in a generation. New rules around interest deductibility, overtime pay, and charitable giving are factors that should influence your financial decisions for 2026.

Here are some of the key tax items to focus on for 2026:

Car Shopping Advantage

If you’ve added a new vehicle to the garage this year, or are planning to, the assembly location and financing structure matter more than they used to.

The rule allows taxpayers to deduct up to $10,000 of car loan interest, but it applies only to new cars, excludes leases, and requires final assembly within the U.S. This deduction is an “above-the-line” adjustment, meaning you can claim it whether you itemize deductions or take the standard deduction.

  • For single filers, the deduction begins to phase out above $100,000 MAGI and is fully eliminated at $150,000.
  • For those married filing jointly, the phase-out starts at $200,000 MAGI and is fully eliminated at $250,000.

The “Overtime and Tips” Shift

For those in hourly roles with overtime or service-oriented roles, the new treatment of variable income (like overtime and tips) is a game-changer for monthly cash flow. If your take-home pay has increased, now is the perfect time to “budget for the future” by directing that surplus toward long-term goals before it gets absorbed into daily spending.

  • For tax years 2025 through 2028, workers can deduct up to $12,500 of overtime pay from taxable income, with phaseouts starting at $150,000 (single) and $300,000 (joint).
  • For tax years 2025 through 2028, tipped workers can deduct up to $25,000 of tips from taxable income, with the deduction phasing out above $150,000 (single) or $300,000 (joint).

Rethinking Your Charitable Giving Strategy

Whether you are an itemizer or taking the standard deduction, there are new charitable deduction rules that didn’t exist two years ago.

  • Itemizers: Starting in 2026, there is now a charitable giving floor requiring taxpayers who itemize to contribute at least 0.5% of their adjusted gross income (AGI) to claim deductions (carryforwards allowed).
  • Non-itemizers: You are now eligible for a $1,000 (single) or $2,000 (joint) above-the-line deduction, regardless of itemizing status.

Enhanced Itemizing Opportunity

A major update is the SALT deduction cap — the limit on how much state and local tax you can deduct, including property taxes — which increased from $10,000 to $40,000 for those who itemize. That higher cap starts to phase down for married couples filing jointly with income over $500,000, increases gradually through 2029, and then is set to return to $10,000 in 2030. For many households that were previously capped at $10,000 per year for state/local taxes, this could make itemizing more valuable than it has been in recent years.

The Bottom Line

Tax laws are the “rules of the game,” but your financial plan is the “playbook.” As these new rules move from the headlines into your actual bank account, the best move is to stay proactive.

Next steps

We recommend gathering your recent pay stubs and any new loan documents. We’d love to sit down with you (and your tax professional) to ensure your 2026 strategy is fully optimized for these updates.