Income Smoothing & The New $40,000 SALT Landscape
For years, the "SALT Cap" limited state and local tax deductions to a measly $10,000. In 2026, the game has changed. The SALT cap has been raised to $40,000 (phasing out for those making $500k+), and the standard deduction has nearly doubled.
The "Smoothing" Tactic
Instead of simply taking the standard deduction every year, high-value planning now focuses on Income Smoothing and Deduction Bunching.
Strategic Moves for 2026:
The $40k SALT Play: If you live in a high-tax state, 2026 is the year to finally itemize. Ensure you time property tax payments to maximize the new $40,000 ceiling.
Charitable Lead-In: Use a Donor-Advised Fund (DAF) to "bunch" five years of charitable giving into 2026. This pushes your itemized deductions far above the new $15,750 (Single) / $31,500 (Married) standard deduction.
Tax-Loss Harvesting 2.0: With the top federal rate stabilized at 37%, use losses to offset $3,000 of ordinary income. In 2026, this is worth up to $1,110 in direct tax savings.
The Bottom Line
2026 is about structure. Whether it's electing PTET (Pass-Through Entity Tax) at the business level to bypass the SALT cap entirely or timing your capital gains, "off-the-shelf" tax prep is no longer enough.
