2026 Midyear Tax Review: Identify Overlooked Deductions Before the Busy Season
Summer may feel like the last time you want to think about taxes. But for strategic taxpayers, midyear is one of the best times to get ahead. Small moves made now can add up to meaningful savings when you file your 2026 return. Here are the key areas worth your attention.
Know Your Tax Bracket And Whether It’s About to Change
Most people only think about their tax bracket when they sit down to file. But your bracket affects decisions you make all year long. Take a few minutes now to review your projected income for the rest of 2026 and consider whether any changes are coming.
The good news: the One Big Beautiful Bill Act (OBBBA), enacted in July 2025, permanently extended the lower tax rates established under the 2017 Tax Cuts and Jobs Act (TCJA). Those rates — 10%, 12%, 22%, 24%, 32%, 35%, and 37% — are here to stay, and 2027 bracket adjustments are expected to be modest. That gives you and your tax advisor a solid foundation for planning.
Standard Deduction or Itemizing? Start the Math Now
This is one of the most important questions individual filers face, and waiting until year-end limits your options. For 2026, the basic standard deduction amounts are:
- $16,100 — Singles and married filing separately
- $24,150 — Heads of household
- $32,200 — Married filing jointly
Taxpayers age 65 or older or blind can claim an additional $2,050 (or $1,650 per qualifying spouse if married).
One big factor to consider: the OBBBA temporarily raised the SALT (state and local tax) deduction cap to $40,400 per return through 2029, though it phases down for higher-income earners. This change may tip the scales toward itemizing for taxpayers who previously could not justify it.
Note for high earners: Starting in 2026, taxpayers in the top 37% bracket face a new limitation that reduces the benefit of itemized deductions. Ask your advisor whether income-timing strategies could help.
If You Plan to Itemize, Consider Accelerating Certain Expenses
If you expect to itemize this year, you may be able to pull forward deductible expenses from early 2027 into 2026. A few options to discuss with your tax advisor:
- Mortgage interest: Pay your January 2027 mortgage payment in December 2026 to capture 13 months of deductible interest. Beginning in 2026, mortgage insurance premiums may also be deductible as mortgage interest.
- Property taxes: Prepaying a property tax bill due in early 2027 may allow you to deduct it on your 2026 return. (Now with increased State and Local Tax Limits increased to $40,400, prepaying property taxes could have more of a benefit than in previous years.)
- Charitable giving: Accelerating donations to IRS-approved organizations before year-end can boost your itemized deductions. Keep in mind that itemizers now face a new 0.5% of AGI floor on charitable deductions — so only the amount exceeding that threshold is deductible. This floor prevents donation amounts under the .5% threshold from reducing taxable income, like in previous years. (Non-itemizers can still deduct up to $1,000, or $2,000 for joint filers, in cash donations.)
- Medical expenses: If you have elective procedures coming up, scheduling them before year-end may allow you to deduct qualifying costs exceeding 7.5% of your AGI — including health insurance premiums, certain long-term care insurance premiums, and prescription drugs.
Check In on Your Investment Portfolio
Midyear is an ideal checkpoint for investors. If you hold investments in taxable brokerage accounts, consider these strategies:
- Favor long-term gains: Securities held for more than 12 months are taxed at preferential long-term capital gains rates — 15% for most people, up to 20% for high earners. Compare that to the maximum 37% ordinary income rate that applies to short-term gains, and holding longer clearly has tax advantages.
- Harvest losses: If you have investments sitting at a loss, selling them to offset realized gains can reduce or eliminate capital gains tax. A net capital loss can offset up to $3,000 of ordinary income per year ($1,500 if married filing separately), and excess losses carry forward indefinitely.
- Watch the net investment income tax (NIIT): An additional 3.8% tax applies to investment income for taxpayers with modified AGI over $200,000 ($250,000 for joint filers), which can push the effective rate on long-term capital gains to 18.8% or 23.8%.
A Note for Educators
Teachers and qualifying school staff now have two potential deductions to consider. The longstanding above-the-line deduction allows eligible K-12 educators to deduct up to $350 (or $700 for joint filers if both qualify) in unreimbursed classroom expenses — regardless of whether they itemize. A new, uncapped itemized deduction established by the OBBBA expands eligible expenses and extends qualifying status to coaches and interscholastic sports administrators. If you are an educator, now is a good time to tally your out-of-pocket expenses so far this year.
Get Ahead While There Is Still Time to Act
Midyear tax planning does not require a crystal ball. It just requires enough visibility into your situation to make smart decisions while there is still time to act on them. The strategies above are a starting point — but every taxpayer’s situation is different, and the right moves depend on your income, deductions, and goals.
At JHM, it’s always tax season. Our team is here year-round to help you identify opportunities and avoid surprises. Reach out to us to schedule a midyear tax review before the end of the summer.