OBBB Act: Itemized Deductions and Limitations
September 17, 2026
The One Big Beautiful Bill (OBBB) Act was signed into law on July 4, 2025. The OBBB Act includes a number of tax changes, including permanent and limited modification of many tax provisions set to expire at the end of 2025, new provisions promised by President Trump during his 2024 campaign, and dozens of other changes affecting individuals and businesses.
This letter highlights changes specific to individuals’ itemized deductions.
State and Local Tax (SALT) Deduction Limit for Individuals
The SALT deduction limit for individuals who itemize deductions is temporarily increased for tax years 2025 through 2029. The limit is $40,000 ($20,000 if married filing separately) for 2025, $40,400 ($20,200) for 2026, and increases by one percent over the previous year’s amount in 2027 through 2029.
However, the dollar limit for 2025 through 2029 is reduced by 30 percent of the excess (if any) of the taxpayers modified adjusted gross income (AGI) over a threshold amount by not less than $10,000 ($5,000 if filing separately). The threshold amounts are $500,000 ($250,000 if married filing separately) for 2025, $505,000 ($252,500) for 2026, and increase one percent over the previous year’s amounts in 2027 through 2029.
The SALT deduction reverts back to $10,000 ($5,000 if filing separately) beginning in 2030.
Home Mortgage Interest Deduction
The limitation of the home mortgage interest deduction to interest paid or accrued on acquisition debt under the Tax Cuts and Jobs Act (TCJA) is made permanent. The maximum amount that may be treated as acquisition debt continues to be $750,000 ($375,000 if married filing separately) for any acquisition debt incurred. The suspension of the deduction for interest on home equity debt remains permanent.
Car Loan Interest Deduction
In general, personal interest is not deductible by noncorporate taxpayers. However, for tax years beginning after 2024 and before 2029, individuals may claim a deduction of up to $10,000 for interest paid or accrued on a post-2024 loan for the purchase of a qualified passenger vehicle for personal use. The deduction begins to phase out when the taxpayer’s modified AGI exceeds $100,000 ($200,000 in the case of a joint return). The deduction is also available to taxpayers who do not itemize.
Charitable Contribution Deductions for Individuals
For tax years beginning in 2026, an individual who does not itemize deductions can deduct up to $1,000 ($2,000 in the case of a joint return) in charitable contributions made in cash during the tax year. The deduction is claimed in calculating taxable income and not as an above-the-line deduction in calculating AGI.
In addition, the OBBB Act creates a 0.5-percent floor on charitable contributions for taxpayers who elect to itemize on their returns for tax years after December 31, 2025. This is accomplished by reducing the amount of an individual’s charitable contributions for a tax year by 0.5 percent of the taxpayer’s contribution base for that tax year. Application of this deduction floor to the aggregate allowable contributions is done in a specified order.
Gambling Losses
The term “losses from wagering transactions” is permanently defined to include any deduction otherwise allowable in calculating federal income tax incurred in carrying on any wagering transaction. For example, an individual's otherwise deductible expenses in traveling to or from a casino are subject to the limitation and only deductible to the extent of gambling winnings. In addition, the OBBB Act limits the amount allowed as a deduction for wagering losses to 90 percent of the amount of such losses, only to the extent of the gains from such transactions for tax years beginning after December 31, 2025.
Moving Expense Deduction and Reimbursement Exclusion
The suspension of the deduction under the TCJA for moving expenses and exclusion of moving expense reimbursements for nonmilitary employees and self-employed individuals are made permanent. The deduction and exclusion apply only to active-duty members of the Armed Forces and members of the intelligence community (or their spouses or children).
Miscellaneous Itemized Deductions
The temporary repeal under the TCJA of miscellaneous itemized deductions subject to the two-percent-of-AGI limitation is made permanent. However, expenses for eligible educators are excluded from the 2 percent floor. This provision allows educators to itemize expenses of the type they may deduct as an above-the-line deduction for classroom expenses. The above-the-line deduction is limited to $300 for 2025. However, the new law allows educators an itemized deduction for expenses above the dollar limit for tax years beginning after December 31, 2025.
Phaseout of Itemized Deductions
The former limitation on itemized deductions under the TCJA is permanently repealed and replaced with a new overall limitation on itemized deductions. Under the OBBB Act, an individual‘s itemized deductions are reduced by 2/37 of the lesser of
the taxpayer's itemized deductions or
the taxpayer's taxable income for the tax year (determined without regard to the amount of itemized deductions) that exceeds the dollar amount at which the taxpayer's 37 percent rate bracket begins.
The limitation on itemized deductions applies after the application of any other limitation on the allowance of any itemized deduction
Planning Note
In addition to making the changes summarized here, the OBBB Act makes the standard deduction increase of the TCJA permanent. For tax years beginning in 2026, the standard deduction is increased to $16,100 for a single filer, $24,150 for a head of household, and $32,200 for married individuals filing jointly and adjusted for inflation in subsequent years. An individual may elect to claim itemized deductions of certain personal expenses in lieu of claiming a standard deduction in determining taxable income if it is more advantageous. However, itemized deductions are subject to phase-out for taxpayers in the 37 percent bracket for tax years after 2025.
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