Itemized Deduction News: SALT, Charity Floor, High-Income Cap

Itemized deductions for 2026 look different in several places because of the One Big Beautiful Bill Act signed on July 4, 2025. The standard deduction for joint filers is now $32,200, so itemizing only helps if your Schedule A total clears that number. Above the line, the biggest shifts are a SALT cap raised to $40,400 for most filers, a new 0.5% AGI floor before any charitable gift counts, gambling losses capped at 90% of what you lost, permanence for the $750,000 mortgage interest limit and the disaster-only casualty rule, and a new haircut for taxpayers in the 37% bracket.

Does Itemizing Still Make Sense in 2026

Compare your Schedule A total to the 2026 standard deduction for your filing status:

Married filing jointly: $32,200
Head of household: $24,150
Single: $16,100
Married filing separately: $16,100

These figures reflect inflation adjustments and OBBBA changes.¹ If your deductible expenses don’t top the number for your filing status, itemizing produces no benefit, and most of what follows won’t apply to your return.

State and Local Taxes (SALT)

The SALT cap saw the biggest change. Under the TCJA it sat at $10,000 ($5,000 for married filing separately) from 2018 through 2025. The OBBBA raised the cap to $40,000 for 2025, with 1% annual increases through 2029. For 2026 that puts the cap at $40,400 for most filers and $20,000 for married filing separately.² The cap covers your combined state and local income taxes (or sales taxes, if you pick that instead) plus property taxes. After 2029, the cap drops back to $10,000.

Phase-Out for High Earners

The larger cap phases down when modified adjusted gross income exceeds $505,000 in 2026. The deductible amount shrinks by 30 cents for every dollar over that threshold and bottoms out at $10,000, which happens around $606,000 of income. So the headline $40,400 is a benefit mostly for filers below the phase-out.

Mortgage Interest

The OBBBA made the TCJA mortgage limits permanent. For mortgages taken out after December 15, 2017, interest is deductible on up to $750,000 of loan principal ($375,000 married filing separately). Mortgages from on or before that date keep the older $1 million limit ($500,000 married filing separately).³ There is no scheduled sunset; the $750,000 cap is the rule going forward.

Second Homes

Interest on a second home you use personally still qualifies, but the dollar limits apply to combined mortgage debt across both properties. Two post-2017 mortgages together cannot exceed $750,000 for the interest to be fully deductible.⁴

Home Equity Loans and HELOCs

Interest on a home equity loan or HELOC is deductible only when the funds went to buy, build, or substantially improve the home securing the loan. A HELOC used to pay off credit cards or fund a vacation produces no deductible interest, and that restriction is now permanent.³²

Medical and Dental Expenses

Unreimbursed medical and dental expenses are deductible to the extent they exceed 7.5% of adjusted gross income. That threshold is now permanent.⁵ At $100,000 AGI, only costs above $7,500 count. Someone with $12,000 in qualifying expenses deducts $4,500.

Health insurance premiums paid with after-tax dollars count, along with prescriptions, certain long-term care costs, and medically necessary equipment. The deduction typically matters in years with major surgery, ongoing treatment for chronic conditions, or heavy dental and vision work.

Charitable Contributions

The AGI-based ceilings did not change. Cash gifts to public charities are deductible up to 60% of AGI, and gifts of appreciated property like stock or real estate are generally capped at 30% of AGI.⁶ Amounts above the ceiling carry forward for up to five years.⁷

The New 0.5% AGI Floor

Starting in 2026, charitable contributions on Schedule A are deductible only to the extent they exceed 0.5% of AGI.² At $200,000 AGI, the first $1,000 in gifts produces no tax benefit. Large donors barely feel it. Moderate donors who itemize only because of SALT and mortgage interest may lose most of their charitable deduction to the floor.

Documentation

Any single gift of $250 or more needs written acknowledgment from the charity, and you must have that acknowledgment by the time you file or by the filing deadline, whichever comes first.⁸⁹⁷ Missing documentation is a common reason charitable deductions get denied on audit.

Casualty and Theft Losses

Personal casualty and theft losses are deductible only when they result from a federally declared disaster, and that restriction is now permanent.¹⁰ The OBBBA added a narrow expansion for 2026: losses from certain state-declared disasters now also qualify. A burst pipe or car break-in unrelated to a declared disaster still produces no deduction.

Qualifying disaster losses get reported on Form 4684 with a FEMA disaster declaration number. You can also elect to claim the loss on the prior year’s return, which can accelerate a refund.¹¹

Gambling Losses

Gambling winnings still get reported as income, and losses claimed on Schedule A can offset them. But starting in 2026, deductible gambling losses are limited to 90% of qualifying losses, and those losses still cannot exceed winnings. Someone who won $50,000 and lost $50,000 deducts $45,000, leaving $5,000 in taxable gambling income despite breaking even.

You need a contemporaneous diary or log covering the date, type of wager, location, and amounts won or lost, backed up by W-2G forms, wagering tickets, and bank records.¹² Without records, the IRS can disallow the deduction. Because gambling losses require itemizing, taxpayers who take the standard deduction pay tax on the full winnings with no offset.

Educator Expenses on Schedule A

The OBBBA created a new itemized deduction for K-12 teachers, counselors, principals, and other school personnel who work at least 900 hours during the school year. The older $300 above-the-line educator deduction had a cap; this new Schedule A version does not. Qualifying costs include classroom supplies, books, computer equipment, athletic supplies for physical education, and curriculum-related professional development. Expenses reimbursed by the district do not count. Because it lives on Schedule A, only educators who itemize can use it.²

New Haircut for High-Income Filers

The OBBBA permanently repealed the old Pease limitation, which had trimmed itemized deductions by 3% of income above a threshold. In its place, a new limit applies once taxable income reaches the 37% bracket. For 2026 that’s $640,600 for single filers and $768,700 for joint filers.¹

The formula reduces total itemized deductions by 2/37 (about 5.4%) of the lesser of your total itemized deductions or the amount of income above the 37% bracket threshold. It applies after every other floor, cap, and phase-out has been calculated. The bite is generally lighter than the old Pease rule, but high earners still don’t get face value on Schedule A.

What’s Permanently Off Schedule A

The OBBBA made the TCJA’s cuts to miscellaneous itemized deductions permanent. Unreimbursed employee business expenses, tax preparation fees, investment advisory fees, and other items formerly deductible above a 2% AGI floor are gone for good.² Anyone waiting for a 2025 sunset to bring them back can stop waiting. The new educator expense itemized deduction is the only exception.

The $750,000 mortgage interest cap and the home equity interest restriction are also permanent features rather than temporary provisions. For planning purposes, these are now the baseline.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
2
Tax Policy Center. How Did the TCJA and OBBBA Change the Standard Deduction and Itemized Deductions
3
Congressional Research Service. 2019 Tax Filing Season (2018 Tax Year) – The Mortgage Interest Deduction
4
Internal Revenue Service. Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses) 5
5
Internal Revenue Service. Topic No. 502 Medical and Dental Expenses
6
Internal Revenue Service. Charitable Contribution Deductions
7
Office of the Law Revision Counsel. 26 US Code 170 – Charitable, Etc., Contributions and Gifts
8
Internal Revenue Service. Charitable Organizations – Substantiation and Disclosure Requirements
9
Internal Revenue Service. Instructions for Form 8283 (Rev. December 2025)
10
GovInfo. 26 USC 165 – Losses
11
Internal Revenue Service. Instructions for Form 4684
12
Internal Revenue Service. Diary or Similar Record