9 Smart Tax Strategies California Homeowners Need to Know in 2026

New year, new tax breaks.

If you're a California homeowner, 2026 brings significant tax changes that could put hundreds — or even thousands — back in your pocket.

Between federal tax code updates and state-specific opportunities, there's a lot to navigate. We've broken down the most impactful strategies into actionable steps you can take right now.

1. Maximize Your SALT Deduction (Finally)

The Big Change: The State and Local Tax (SALT) deduction cap jumped from $10,000 to $40,000 for 2026.

For California homeowners paying high property and state income taxes, this is huge. Before, you could only deduct $10,000 total. Now? You can deduct up to $40,000.

Who This Helps: Homeowners with combined state income tax and property tax bills above $10,000. In California, that's most middle to upper-income households.

Action Step: Make sure you're itemizing your deductions if your total itemized deductions (including SALT, mortgage interest, and charitable contributions) exceed the standard deduction of $32,200 for married couples filing jointly.

2. Claim Your Senior Deduction (New for 2026)

The Change: If you're 65 or older, you can now claim an additional $6,000 deduction ($12,000 for married couples if both qualify) on top of the standard deduction.

This is in addition to the existing senior standard deduction increase.

Who This Helps: Seniors with a Modified Adjusted Gross Income (MAGI) under $75,000 for singles or $150,000 for joint filers. The deduction phases out above these amounts.

Action Step: If you turned 65 in 2025 or are already 65+, talk to your tax preparer about claiming this. It's available through 2028.

3. Take Advantage of Higher Standard Deductions

The Numbers:

• Married filing jointly: $32,200 (up from $31,100 in 2025)
• Single filers: $16,100 (up from $15,550)
• Head of household: $24,150 (up from $23,300)
• Seniors 65+: Add $2,050 for single filers or $1,650 for married filers

Action Step: Run the numbers to see if you're better off taking the standard deduction or itemizing. With the higher SALT cap, more Californians might benefit from itemizing.

4. Use the Pass-Through Entity (PTE) Tax Election

For Business Owners: California's PTE tax election lets S-corps, partnerships, and LLCs pay state taxes at the entity level instead of the individual level.

Why does this matter? It effectively bypasses the SALT cap. Even with the higher $40,000 cap, business owners with high incomes can save more by using the PTE election.

Who This Helps: Small business owners, freelancers, and real estate investors with pass-through income.

Action Step: Talk to your CPA about whether electing into California's PTE tax makes sense for your business. The election is available through 2030.

5. Leverage Updated Tax Brackets

The IRS adjusted tax brackets for inflation. You'll need higher income to hit the same tax rates as last year.

Example: For married couples filing jointly, the 24% tax bracket now starts at $206,700 (up from $201,050 in 2025). That means more of your income is taxed at lower rates.

Action Step: Review your withholding. If you got a big refund last year, you might be over-withholding. Adjust your W-4 to keep more money in your paycheck throughout the year.

6. Boost Retirement Contributions

401(k) Contribution Limit: $23,500 for 2026 (up from $23,000 in 2025)

Catch-Up Contributions (age 50+): $7,500 additional

IRA Contribution Limit: $7,000 (up from $6,500), plus $1,000 catch-up if you're 50+

Action Step: Max out your retirement contributions if possible. It lowers your taxable income now and grows tax-deferred.

7. Review Your Estate Plan

The Change: The federal estate tax exemption increased to $15 million per person ($30 million for married couples) in 2026.

California doesn't have a state estate tax, so this is purely federal. But if you're sitting on significant home equity plus other assets, this is worth reviewing.

Action Step: If your estate is approaching these thresholds, talk to an estate planning attorney about strategies to protect your wealth.

8. Don't Miss Energy-Efficient Home Credits

Federal tax credits for energy-efficient home improvements are still available in 2026.

What Qualifies:

• Solar panels (30% tax credit)
• Energy-efficient windows and doors
• Heat pumps
• Insulation upgrades

Action Step: If you're planning renovations, prioritize energy-efficient upgrades that qualify for federal tax credits.

9. Appeal Your Property Assessment (Yes, Really)

Here's one most California homeowners don't think about: your property tax bill might be too high.

30–60% of properties are over-assessed. That means you could be overpaying on your property taxes every year.

How It Works:

California counties send out assessment notices between June and September. If your home's assessed value is higher than its actual market value, you have the right to appeal.

The deadline varies by county, but appeals typically need to be filed between July and November.

The Payoff: Most successful appeals save homeowners 10–15% annually. For a $500,000 home, that's $1,000+ in savings — every year.

Thanks to California's property tax cap under Proposition 13, your assessed value can only increase by 2% per year. But if you're starting from an inflated base, you're still overpaying.

Counties use mass appraisal systems that process thousands of properties at once. These automated systems often make errors — wrong square footage, outdated comparable sales, or features you don't have.

If your home is valued higher than similar properties nearby, you may have an unequal appraisal case. Learn the 5 signs your home is overassessed.

Action Step: Check your most recent assessment notice. If you think your home is overvalued, you have the right to appeal. TaxDrop handles the entire appeal process for California homeowners. We use a no win, no fee model — we only charge 25% of your first-year savings if we reduce your property taxes by at least $500. Otherwise, it's completely free.

Your 2026 Tax Action Plan

1. Run the SALT calculation — See if itemizing makes sense now
2. Claim the senior deduction — If you're 65+, don't leave this on the table
3. Adjust your W-4 — Keep more money in your paycheck if you're over-withholding
4. Max out retirement contributions — Lower your taxable income
5. Review your property assessment — Make sure you're not overpaying

The start of the year is the perfect time to get ahead of your taxes. Take an hour this week to review these strategies with your tax advisor.

And don't forget: If your property taxes feel too high, they probably are. Check your assessment notice and see if you're eligible for savings.

Ready to reduce your property taxes? Get a free savings estimate at TaxDrop.com in under 2 minutes.