The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4th, 2025. One key change included as part of the tax bill is a new significant expansion and revision of itemized deductions for tax years 2025 through 2028. Below are key points to note regarding eligibility, changes in deduction categories, and new limitations or thresholds affecting itemized filers.
What are itemized deductions that can be included?
- State and local income or sales taxes
- Real estate and personal property taxes
- Home mortgage interest
- Gifts to a qualified charity
- Unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income
- Personal casualty and theft losses from a federally declared disaster
- State and Local Taxes, Mortgage Interest Expense on personal residence and Charitable Deductions have limitations. This adds another layer of restrictions when all deductions are combined
What has changed?
- New Restrictions on itemized Deductions - Replaces the "PEASE" Limitation.
- In 2026, OBBBA restricts the amount of Itemized Deductions available to high income earners in 37% tax bracket or higher.
- This replaces the Pease limitation, which is still suspended in 2025 and will be eliminated in 2026.
- Reduces the itemized deduction by 2/37 for the income in the 37% tax bracket. This effectively limits itemized deductions to only be 35% of AGI.
If you have any questions, or if you would like to schedule an appointment to understand the impact of these changes on your situation, please do not hesitate to contact our team. Appointments can be scheduled online by visiting our website at www.ongandcompany.com.