Standard and itemized deductions are among the many areas affected by the One Big Beautiful Bill Act (OBBBA). These changes could affect your federal income tax obligation for 2025 and require year-end tax planning moves. Some taxpayers who are accustomed to claiming the standard deduction might decide to itemize this year (and vice versa). In addition, certain provisions that go into effect next year may affect your deduction strategies. Here’s what you need to know.

Standard Deduction Under the Big Beautiful Bill

The OBBBA permanently increases the standard deduction. This is a dollar-for-dollar reduction in your taxable income based on your filing status. For 2025, the standard deduction is:

• $15,750 for single taxpayers and married individuals filing separately,
• $23,625 for heads of households, and
• $31,500 for married couples filing jointly.

These amounts are adjusted annually for inflation. 

SALT Deduction Limit

For 2018 through 2025, the Tax Cuts and Jobs Act of 2017 (TCJA) limited itemized deductions for state and local taxes (SALT) to $10,000 ($5,000 for separate filers). The OBBBA temporarily raises the SALT deduction limit through 2029. In 2030, the TCJA limit of $10,000 will return.

Beginning in 2025, you can deduct up to $40,000 ($20,000 for separate filers). The deduction will increase by 1% for each subsequent year through 2029. 

However, the allowable deduction may be reduced for certain high-income individuals. Specifically, it drops by 30% of the amount by which your modified adjusted gross income (MAGI) exceeds a threshold amount. However, the deduction can’t fall below the TCJA amount of $10,000 ($5,000 for separate filers). For 2025, the reduction threshold is $500,000 ($250,000 for separate filers). This threshold will also increase 1% each year through 2029. 

If you live in a high-tax state or pay significant property taxes, this provision could cause you to itemize rather than claim the standard deduction. It’s also important to note that the new law doesn’t change pass-through entity SALT workarounds that most states have established.   

Miscellaneous Itemized Deductions

Before the TCJA, itemizers could deduct certain miscellaneous itemized deductions, subject to a 2% of adjusted gross income (AGI) floor. The TCJA suspended many miscellaneous itemized deductions through 2025. The suspension included deductions for investment expenses, legal and tax preparation fees, and certain unreimbursed employee expenses (except for $300 for eligible educators who don’t itemize).

The OBBBA permanently suspends most miscellaneous itemized deductions. However, beginning in 2026, K-12 educators may be eligible for a new miscellaneous itemized deduction not subject to the 2% floor for eligible educator expenses — in addition to the current above-the-line deduction of up to $300 for qualified expenses.

Mortgage Interest Deductions

The OBBBA makes permanent the limits on itemized deductions for mortgage interest expense and home equity loan interest. Under current law, the home acquisition debt limit is $750,000 ($375,000 for separate filers) for debt incurred after December 15, 2017.  

Starting in 2026, certain mortgage insurance premiums will be eligible for the mortgage interest deduction. However, the deduction for these premiums will begin to phase out once your AGI exceeds $100,000 ($50,000 for married individuals who file separately).

Charitable Contribution Deductions

For 2025, you must itemize to deduct your donations. The OBBBA makes permanent the TCJA’s increased contribution limitation for cash gifts made to qualified charities. So itemizers can deduct such gifts up to 60% of their AGI.

Starting in 2026, the new law will reduce the tax value of some charitable contributions. Specifically, itemized deductions for charitable contributions will be subject to a 0.5% of AGI floor after 2025. So, high-income taxpayers who itemize may find it worthwhile to accelerate charitable contributions into 2025.

However, there will be a new tax break for people who claim the standard deduction: Starting in 2026, the OBBBA provides a charitable deduction of up to $1,000 ($2,000 for married couples filing jointly) for cash donations. 

New Overall Limit on Itemized Deductions

Before the TCJA, certain high-income taxpayers were subject to a tax code provision known as the “Pease limitation.” The TCJA suspended the limitation through 2025, and the OBBBA permanently eliminates it. But the new law imposes a new limit on taxpayers in the top (37%) tax bracket. 

Starting in 2026, the tax-reduction value of itemized deductions for those in the highest bracket will be limited to 35 cents for every dollar of itemized deduction. Without this limit, itemized deductions would be worth 37 cents per dollar. The new limit will apply to all itemized deductions, except the qualified business income (QBI) deduction for pass-through business owners. 

FAQ

1. How do I know whether to itemize or take the standard deduction for 2025? Add up your eligible itemized deductions: SALT, mortgage interest, charitable contributions, and others, and compare the total to your standard deduction amount. Whichever is higher generally leads to lower taxable income.
2. Does the higher SALT deduction mean I should itemize this year? Possibly. If you live in a state with high income or property taxes, the increased SALT cap under OBBBA could make itemizing more advantageous.
3. Are charitable deductions still available for people who don’t itemize? Yes. Beginning in 2026, standard deduction filers can claim a limited charitable deduction of up to $1,000 ($2,000 for joint filers).
4. What if my income is above $500,000? Will I lose deductions? Some limits apply to high-income taxpayers starting in 2026, including reduced SALT deductions and a 35-cent-per-dollar limit on deduction value.
5. Should I accelerate any deductions before year-end 2025? Possibly. Accelerating charitable contributions or deductible payments into 2025 could provide a greater benefit before the new 2026 limitations take effect.