Thinking ahead to our 2026 budget
September 24, 2025
Sometimes this exercise feels a little like grasping at straws to feel like I’m in control of something, since I’m in control of so little, but mostly it’s to help myself remember all the moving pieces.
Pros:
With my vastly increased responsibilities at work, my salary went up a bit (not at all proportional to the amount of work it increased by, of course). As usual, I won’t count on the bonuses. Even though they include that as part of my total compensation, a) not guaranteed because that’s entirely dependent on the larger company’s performance. I can only do my best and they could still fail to meet whatever pie in the sky targets they set. Not my circus, not my monkeys. Well, a little bit my monkeys, but not the kind I get to control. b) this year’s bonus isn’t paid til well into next year so next year’s bonus (if any) wouldn’t be paid into 2027 etc. As far as my financial planning is concerned, that’s all pretend money until (and if) it lands.
The SALT tax cap lift (effective in 2025) to $40K does help us, because our state and local taxes are so damn high. It’d be great if the taxes were lower to begin with so we weren’t paying $40k+ in taxes but here we are. Literally here, being in CA has a lot to do with why we’re taxed so much. My Alaskan friends aren’t paying anything like our property and state taxes and the SALT tax increase doesn’t even register on their radar.
Cons:
Open enrollment in October will bring some kind of healthcare premium increase. The only question is how much. I already pay around $10k/year out of pocket for our various expenses, that doesn’t include our premiums. I should go calculate how much those premiums cost. I tend to forget it once open enrollment is over.
We’ve always itemized deductions because of all our expenses which includes a fair lot of charitable giving. In 2026, we’re going to lose the charitable giving deduction as it exists now. Taking the standard deduction allows you to also deduct $1000/2000 for charitable giving but itemizers have a new threshold to exclude:
Beginning next tax year, a different provision sets a threshold for itemized charitable contributions, equating to 0.5% of a taxpayer’s adjusted gross income. For example, an itemizer earning $500,000 would need to exclude the first $2,500 of their donations before receiving any tax benefit.
I’ve got to do the actual math on that because I did it wrong before. ($500,000 to use their example, x 0.05% vs $500,000 x 0.05 which is what I did first. Oops. Very different results.) See? Good thing I’m writing this and double checking my work.
I’m really not motivated to read through the whole damn thing budget bill to find out what else is going to impact us but it feels like I need more than just the highlights from Kiplingers and co.
Re: the itemization limit increase – last year I think itemizing meant I got an extra $100 over the standard deduction, so even though my giving has increased I don’t think I’ll be itemizing anymore.
And I’m glad I’m not paying so much mortgage interest nowadays but it WAS fun getting big tax returns. Ah well.
That makes sense. $100 doesn’t feel worth the trouble of itemizing. As a PF person I’m not supposed to like or want big tax returns but honestly, I never minded too much. It was the trade-off of not risking underpaying tax and not having to worry about missing the mark when I calculate the yearly tax due.
I was just doing similar, calculating our rough tax bill for next year. The SALT cap will bump us back over to itemizing instead of standard, so that’s welcome and nets us something like $5k. A pretty big deal.
I hadn’t noted the changes to charitable deductions for itemizers, so thanks for flagging that one. Bummer, but also makes my thought of a donor-advised fund even more attractive. I don’t know if I’m ready to pull that trigger yet.
Also, I’m with you on straw grasping. The biggest budget impact is obviously jobs, and those remain uncertain.
Yay for putting $5K back in your pockets!
The good news is that the change is relatively minimal when you do the math right. When I did it wrong, it felt like a much bigger blow. Same with the DAF, it feels like a good thing to do but at the same time I’m not ready to deal with all that.
My fingers are crossed for all of us! The job market and economy is awful.
I’m feeling fairly gloomy about how our finances will probably look next year; my husband’s job is secure though stressful, but we’re expecting 0% raise vs Big% increase in premiums & other expenses. But until we get the exact amounts there really isn’t anything I can actually grapple with, so for now I’m just gonna pull my tattered Blanket of Ignorance up around my ears and hope it still has some Bliss left inside. Grumblecakes.
Aw man, that’s not the WORST scenario but definitely not one of the better ones. Fingers are crossed that the increases aren’t as bad as we’re all fearing.
I will share my Quilt of Whatcha Gonna Do? with you.