The One Big Beautiful Bill Act, enacted on July 4, 2025 as Public Law 119-21, introduced a wide range of changes that will impact tax returns for the 2025 tax year and beyond.
Starting in tax year 2026, itemized deductions will be reduced for taxpayers in the highest tax bracket (37%) by 2/37 of the lesser of:
- Total itemized deductions, or
- Taxable income above the top 37% tax bracket threshold.
The OBBB made permanent the Pease limitation on itemized deductions that was eliminated by the Tax Cuts and Jobs Act of 2017.
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