Itemized Deductions Strategies Under OBBBA

The recently enacted One Big Beautiful Bill Act (OBBBA) includes several permanent changes that directly affect taxpayers who itemize deductions. Some provisions take away opportunities, while others preserve valuable tax breaks. Here’s what you need to know—and how you can plan to win.

Permanent Repeal of Miscellaneous Itemized Deductions

The Tax Cuts and Jobs Act (TCJA) suspended miscellaneous itemized deductions for 2018-2025. The OBBBA makes that suspension permanent.

This means you can no longer deduct unreimbursed employee business expenses, investment expenses, or other items previously subject to the 2 percent adjusted gross income (AGI) floor. If you incur employee business expenses, the solution is straightforward: have your corporation reimburse you so the expense gets properly deducted.

Itemized Deductions That Remain

Many important deductions remain available. You may still claim

• mortgage interest;

• state and local taxes (SALT);

• charitable contributions;

• medical expenses, including health insurance premiums; and

• personal casualty and theft losses.

These deductions continue to appear on Schedule A of Form 1040, subject to existing limits.

New Limits for High-Income Taxpayers

Starting in 2026, high-income taxpayers in the 37 percent bracket face a new reduction in itemized deductions. The OBBBA caps the benefit of itemized deductions at no more than 35 percent of their value.

For example:

• If your taxable income barely crosses into the 37 percent bracket, your deductions will be reduced modestly.

• If you have significant income, your deductions may be reduced or even eliminated.

In short, the higher your income above the 37 percent threshold, the greater the haircut on your itemized deductions.

Planning Strategies

To protect your deductions, use these strategies:

• Avoid unreimbursed employee expenses by arranging corporate reimbursements.

• Monitor your taxable income to reduce the risk of crossing into the 37 percent bracket. For 2025, this threshold starts at $626,350 for single filers and $751,600 for joint filers (adjusted annually for inflation).

Takeaway

The OBBBA reshapes itemized deductions for the long term. While some opportunities have disappeared, key deductions remain, and planning strategies still exist to maximize your tax benefit. By structuring expenses properly and managing taxable income, you can continue to win under the new rules. Your next step? Check out our Proactive Tax Strategy & Planning for Business Owners. While you're there, take the 2-minute Tax Strategy Assessment and get some free tax strategy ideas. We provide these articles as general information and not individualized tax advice.  They do not constitute a client relationship with you, and any information provided here should be applied at your own risk.