Navigating the Tax Landscape: SALT Deductions and HSA Contributions in 2026
May 3, 2025, 10:04 pm
Location: United States, District of Columbia, Washington
Employees: 10001+
Founded date: 1862
The tax landscape is shifting. Two key areas are drawing attention: the SALT deduction and Health Savings Accounts (HSAs). Both have implications for taxpayers, especially those in high-tax states and those planning for healthcare costs in retirement.
Let’s dive into the details.
The SALT deduction, or state and local tax deduction, is a lifeline for many taxpayers. Currently capped at $10,000, this deduction allows individuals to deduct state and local taxes from their federal taxable income. This cap, established by the Tax Cuts and Jobs Act of 2017, is set to expire at the end of 2025 unless Congress intervenes.
Why does this matter? For taxpayers in high-tax states like California, New York, and New Jersey, the SALT cap is a significant concern. Lawmakers from these states are pushing for an increase or complete repeal of the cap. They argue that the current limit disproportionately affects middle and upper-middle-income households.
Raising the SALT cap could primarily benefit higher earners. Those who itemize deductions—typically higher-income individuals—stand to gain the most. If the cap were raised to $20,000 for married couples, households earning over $200,000 would see substantial tax relief.
But here’s the catch: only about 10% of taxpayers itemize deductions. The majority opt for the standard deduction, which for 2025 is $15,000 for singles and $30,000 for married couples. This means that while the SALT cap debate rages on, most taxpayers won’t feel the direct impact.
The SALT deduction is not just a tax issue; it’s a political battleground. With a slim Republican majority in the House, the voices from high-tax states could sway negotiations. However, the budget is tight, and competing priorities abound. A complete repeal of the SALT cap seems unlikely, but adjustments could be on the table.
Meanwhile, the IRS has announced new contribution limits for Health Savings Accounts (HSAs) for 2026. The contribution limit for self-only coverage will rise to $4,400, while family plans will see a jump to $8,750. This increase reflects inflation adjustments and underscores the growing importance of HSAs in financial planning.
HSAs offer triple tax benefits: contributions are tax-deductible, the account grows tax-free, and withdrawals for qualified medical expenses are also tax-free. This makes HSAs a powerful tool for managing healthcare costs, especially as individuals approach retirement.
To qualify for HSA contributions, you must have a high-deductible health plan. For 2026, that means a deductible of at least $1,700 for individual coverage or $3,400 for family coverage. The out-of-pocket expense cap cannot exceed $8,500 for individuals or $17,000 for families.
Financial advisors recommend treating HSAs as long-term investments. Instead of using the funds for current medical expenses, consider letting the balance grow. This strategy can be particularly beneficial as healthcare costs in retirement can be staggering. A 65-year-old retiring in 2024 could face average medical expenses of $165,000, not including long-term care costs.
Despite the advantages, many HSA holders are not maximizing their accounts. A recent survey revealed that only 18% of participants invest their HSA balances. Most still use HSAs for immediate healthcare expenses, missing out on the long-term growth potential.
The landscape of tax policy is complex and ever-changing. The SALT deduction and HSA contributions are just two pieces of a larger puzzle. As Congress debates tax reforms, the implications for taxpayers will be significant.
For those in high-tax states, the SALT cap remains a pressing issue. An increase could provide much-needed relief, but the political climate makes any changes uncertain. On the other hand, HSAs present a clear opportunity for individuals to save for future healthcare costs.
As we look ahead to 2026, taxpayers should stay informed. Understanding these tax provisions can lead to better financial decisions. Whether it’s advocating for changes to the SALT deduction or maximizing HSA contributions, knowledge is power.
In the end, navigating the tax landscape requires vigilance. Tax laws may shift like sand, but being prepared can help individuals weather the storm. The future of tax policy is in flux, but one thing is clear: taxpayers must adapt to thrive.
Stay tuned. The tax conversation is just beginning.
Let’s dive into the details.
The SALT deduction, or state and local tax deduction, is a lifeline for many taxpayers. Currently capped at $10,000, this deduction allows individuals to deduct state and local taxes from their federal taxable income. This cap, established by the Tax Cuts and Jobs Act of 2017, is set to expire at the end of 2025 unless Congress intervenes.
Why does this matter? For taxpayers in high-tax states like California, New York, and New Jersey, the SALT cap is a significant concern. Lawmakers from these states are pushing for an increase or complete repeal of the cap. They argue that the current limit disproportionately affects middle and upper-middle-income households.
Raising the SALT cap could primarily benefit higher earners. Those who itemize deductions—typically higher-income individuals—stand to gain the most. If the cap were raised to $20,000 for married couples, households earning over $200,000 would see substantial tax relief.
But here’s the catch: only about 10% of taxpayers itemize deductions. The majority opt for the standard deduction, which for 2025 is $15,000 for singles and $30,000 for married couples. This means that while the SALT cap debate rages on, most taxpayers won’t feel the direct impact.
The SALT deduction is not just a tax issue; it’s a political battleground. With a slim Republican majority in the House, the voices from high-tax states could sway negotiations. However, the budget is tight, and competing priorities abound. A complete repeal of the SALT cap seems unlikely, but adjustments could be on the table.
Meanwhile, the IRS has announced new contribution limits for Health Savings Accounts (HSAs) for 2026. The contribution limit for self-only coverage will rise to $4,400, while family plans will see a jump to $8,750. This increase reflects inflation adjustments and underscores the growing importance of HSAs in financial planning.
HSAs offer triple tax benefits: contributions are tax-deductible, the account grows tax-free, and withdrawals for qualified medical expenses are also tax-free. This makes HSAs a powerful tool for managing healthcare costs, especially as individuals approach retirement.
To qualify for HSA contributions, you must have a high-deductible health plan. For 2026, that means a deductible of at least $1,700 for individual coverage or $3,400 for family coverage. The out-of-pocket expense cap cannot exceed $8,500 for individuals or $17,000 for families.
Financial advisors recommend treating HSAs as long-term investments. Instead of using the funds for current medical expenses, consider letting the balance grow. This strategy can be particularly beneficial as healthcare costs in retirement can be staggering. A 65-year-old retiring in 2024 could face average medical expenses of $165,000, not including long-term care costs.
Despite the advantages, many HSA holders are not maximizing their accounts. A recent survey revealed that only 18% of participants invest their HSA balances. Most still use HSAs for immediate healthcare expenses, missing out on the long-term growth potential.
The landscape of tax policy is complex and ever-changing. The SALT deduction and HSA contributions are just two pieces of a larger puzzle. As Congress debates tax reforms, the implications for taxpayers will be significant.
For those in high-tax states, the SALT cap remains a pressing issue. An increase could provide much-needed relief, but the political climate makes any changes uncertain. On the other hand, HSAs present a clear opportunity for individuals to save for future healthcare costs.
As we look ahead to 2026, taxpayers should stay informed. Understanding these tax provisions can lead to better financial decisions. Whether it’s advocating for changes to the SALT deduction or maximizing HSA contributions, knowledge is power.
In the end, navigating the tax landscape requires vigilance. Tax laws may shift like sand, but being prepared can help individuals weather the storm. The future of tax policy is in flux, but one thing is clear: taxpayers must adapt to thrive.
Stay tuned. The tax conversation is just beginning.