Tax Cuts and Jobs Act: The structure of tax deductions in the United States has undergone significant transformation over the past decade. The Tax Cuts and Jobs Act (TCJA) reshaped how millions of Americans calculate taxable income, sharply increasing the standard deduction while narrowing the scope of itemized deductions. Now, with the enactment of the One Big Beautiful Bill Act (OBBBA), several of those earlier provisions have been made permanent, while others have been modified to reflect new fiscal priorities.

For taxpayers preparing future returns, these updates matter because they directly influence how much income is subject to federal tax. Whether a filer chooses the standard deduction or itemizes expenses can alter overall liability. According to reports, fewer Americans are itemizing today compared to pre-2018 levels, largely because the higher standard deduction makes itemizing less beneficial for many households. Understanding what has changed — and what remains restricted — is essential for informed planning.

Standard Deduction Expansion and Inflation Indexing Shift

The TCJA nearly doubled the standard deduction beginning in 2018, reducing the need for many taxpayers to track itemized expenses. The updated law further increases these baseline deductions. For example, under OBBBA, the standard deduction rises to $15,750 for single filers and married individuals filing separately, $31,500 for married couples filing jointly, and $23,625 for heads of household, based on available documents.

Another important adjustment involves inflation indexing. The TCJA shifted the inflation calculation method from the traditional CPI-U to the chained CPI-U. In practical terms, this approach tends to produce smaller annual increases over time. While deductions still rise annually, the growth pace may be slower than under the previous system. This technical change can gradually affect tax brackets and deduction thresholds in future years.

SALT Deduction Cap: Higher Ceiling with Income Phaseout

One of the most debated provisions of the TCJA was the $10,000 cap on the state and local tax (SALT) deduction. That cap significantly reduced deductions for taxpayers in high-tax states. Under OBBBA, the SALT cap increases to $40,000 from 2025 through 2029. However, the expanded cap comes with an income limitation.

Taxpayers earning above $500,000 begin to see the higher deduction phased down, with the benefit gradually returning to $10,000 for those exceeding $600,000 in income. Both the cap and the income threshold are set to rise by 1% annually through 2029. This structure may provide relief to upper-middle-income homeowners in certain states, though the benefit may vary by case depending on total earnings.

Mortgage Interest and Charitable Deduction Adjustments

The mortgage interest deduction was tightened under the TCJA, limiting eligible debt to $750,000 for loans taken after December 15, 2017. Interest on home equity loans remains deductible only if the funds are used to buy, build, or substantially improve the property securing the loan. OBBBA makes these restrictions permanent, maintaining the lower debt threshold compared with the pre-2018 $1 million limit.

Charitable giving rules have also evolved. The allowable deduction limit increased from 50% to 60% of adjusted gross income (AGI). Additionally, OBBBA introduces a new deduction of up to $1,000 for single filers and $2,000 for joint filers, even for those taking the standard deduction. However, itemizers must exceed 0.5% of AGI in annual contributions before claiming the charitable deduction. This may encourage broader participation in philanthropy, though smaller donors should review eligibility carefully.

Medical Expenses and Miscellaneous Deductions

Medical expense deductions under the TCJA allowed taxpayers to deduct unreimbursed costs exceeding 7.5% of AGI, temporarily lowering the threshold from 10%. These provisions have since expired, meaning the higher 10% floor may again apply unless extended through future legislation. This change particularly affects retirees and families with significant healthcare costs.

Other miscellaneous itemized deductions, such as unreimbursed employee expenses and tax preparation fees, were eliminated under the TCJA and have now been made permanent by OBBBA. A limited exception exists for certain educators and school personnel who may deduct qualifying classroom-related expenses. As per guidelines, documentation and verification are recommended before claiming such deductions.

How Fewer Taxpayers Benefit from Itemizing

Before 2018, roughly 31% of filers itemized deductions. By 2022, that figure had fallen to approximately 8%, according to tax data comparisons. The steep decline reflects how the expanded standard deduction often exceeds combined itemizable expenses for middle-income households. In effect, many taxpayers benefit from a simplified filing process.

For example, a married couple with moderate mortgage interest and charitable contributions may find their total itemized deductions fall below the new $31,500 joint standard deduction threshold. In that scenario, taking the standard deduction could reduce complexity without increasing liability. A tax policy analyst recently noted that “the broader standard deduction has shifted tax planning from expense tracking toward income management strategies.”

Clarification: The higher SALT cap and charitable adjustments do not automatically guarantee lower taxes. Benefits depend on income level, filing status and total deductible expenses, and results may vary by case.

Limitation Note: Several provisions are time-bound, particularly the expanded SALT cap through 2029. Future congressional action could alter these rules again.

Verification Method: Taxpayers can confirm eligibility and deduction limits by reviewing official IRS publications and consulting certified tax professionals before filing.

Disclaimer: This article is intended for informational purposes only and does not constitute tax advice. Deduction eligibility and tax liability depend on individual financial circumstances and applicable federal guidelines. Readers should consult qualified professionals or official IRS resources for advice specific to their situation.