ONE BIG BEAUTIFUL BILL ACT BRINGS CHANGES TO ITEMIZED DEDUCTIONS

Think you’ll be able to itemize your deductions on your 2025 return?

The One Big Beautiful Bill Act (H.R. 1, signed into law on 07/04/2025) makes changes to the deductions for tax year 2025 in several ways.

THE SALT CAP GOES UP

The Tax Cuts and Jobs Act (TCJA) of 2017 created a $10,000 cap on the amount of state and local taxes (SALT) you could deduct as an itemized deduction. That $10,000 cap was set to expire after 2025.

The new tax law makes the SALT cap permanent and temporarily increases the cap to $40,000 for 2025 ($20,000 for married filing separately) with a 1% annual increase through 2029 (for example, $40,400 in 2026). The increased cap is subject to phaseout when modified adjusted gross income (MAGI) is greater than $500,000 in 2025 (with a 1% annual increase in MAGI threshold).

Beginning in 2030, the SALT cap will drop back down to $10,000.

NEW LIMITS ON CHARITABLE DEDUCTIONS

The new tax law limits charitable deductions for itemizers by only allowing a deduction for contributions to the extent that they exceed 0.5% of the taxpayer’s contribution base, essentially creating a contribution base floor that taxpayers must exceed in order to get the deduction.

MORT-GA(U)GE YOUR INTEREST

The TCJA limited the mortgage interest deduction to the first $750,000 in home mortgage acquisition debt and was set to expire after 2025. The new tax law makes the $750,000 home acquisition debt limit permanent.

DEDUCTION TERMINATED

The TCJA suspended the 2% miscellaneous itemized deduction through tax year 2025 and was set to be reinstated in 2026. The new tax law permanently terminates the deduction. Interestingly, the law also removes unreimbursed employee expenses for educators from the list of miscellaneous itemized deductions.

Not sure how this will affect your 2025 return? Reach out to start a tax plan today.