The One Big Beautiful Bill Act: Itemized Deductions, the SALT Cap, and Charitable Giving
The One Big Beautiful Bill Act made a number of changes to the tax code, and like most tax legislation, the real impact isn’t in the headlines, it’s in the details. A few of those details affect areas that tend to have meaningful downstream implications on a tax return: itemized deductions, the SALT cap, and charitable giving.
Individually, none of these changes are especially complicated. Where things tend to break down is in how the rules apply at different income levels, in different years, and under different fact patterns. That’s where outcomes can shift, even when nothing feels materially different from the taxpayer’s perspective.
This is a straightforward look at what changed in each area and how those changes actually work.
Itemized deductions
Beginning in 2026, itemized deductions are subject to a new limitation for taxpayers in the highest marginal tax bracket.
Once this limitation applies, itemized deductions no longer reduce tax at the full 37% marginal rate. Instead, the tax benefit of itemized deductions is capped at 35%. The deductions are still allowed and still claimed in full, but their tax impact is reduced once income reaches the applicable threshold.
This applies across itemized deductions. Mortgage interest, state and local taxes, and charitable contributions are all affected. The limitation is income-based, not deduction-specific.
From a planning standpoint, the implication is straightforward. For high earners who itemize, deductions remain valuable, but they are less effective at offsetting income than they were prior to 2026. Assumptions based on the top marginal rate need to be adjusted accordingly.
The SALT cap
The SALT cap is increased for a limited window, but the increase is not uniform across income levels.
For tax years 2025 through 2029, the SALT deduction cap increases from $10,000 to $40,000 ($20,000 for married filing separately), with modest inflation adjustments each year. In 2030, the cap is scheduled to revert back to $10,000 ($5,000 MFS).
That headline change is real. The part that matters just as much is how the increased cap phases out as income rises.
Beginning at $500,000 of modified adjusted gross income ($250,000 for married filing separately), the allowable SALT deduction begins to phase down. The deduction is reduced by 30% of the amount by which income exceeds the threshold, but it cannot be reduced below $10,000 ($5,000 MFS).
In practical terms, this means the benefit of the higher cap is fully phased out once income is roughly $100,000 above the threshold. For a married couple filing jointly, that puts the effective cap back at $10,000 once income is around $600,000, even though the statutory cap is still $40,000.
The implication is straightforward. The SALT deduction is no longer determined solely by how much you paid in state and local taxes. It is also determined by the type of income year you are having. A large Roth conversion, significant capital gains, or a one-time liquidity event can materially reduce or eliminate the benefit of the higher cap, even if your state and property taxes are unchanged.
That variability is the main shift. The SALT cap is higher, but it is conditional, temporary, and highly sensitive to income.
Charitable giving
Charitable giving is where the Act introduces the most meaningful mechanical change, and it applies beginning in 2026.
Starting in 2026, itemized charitable deductions are subject to a new 0.5% of adjusted gross income (AGI) floor. Charitable contributions are only deductible to the extent total giving exceeds that threshold in a given year. This applies to any taxpayer who itemizes, regardless of income level.
In practical terms, the first 0.5% of AGI given to charity does not generate a deduction. For example, with $400,000 of AGI, the first $2,000 of charitable giving is nondeductible. Only amounts above that level are eligible for the charitable deduction.
This is a structural change. Prior to 2026, charitable deductions for itemizers began at the first dollar. Beginning in 2026, there is a built-in floor that must be cleared every year.
The Act also permanently allows a limited above-the-line charitable deduction for non-itemizers beginning in 2026. The deduction is capped at $1,000 for single filers and $2,000 for married filing jointly. This provides some benefit to taxpayers who take the standard deduction, but it does not offset the new floor that applies to itemized charitable deductions.
The net result is that charitable deductions become more sensitive to both income level and structure. Smaller annual gifts relative to income may no longer produce a deduction for itemizers, while larger or more concentrated gifts are more likely to clear the floor.
For taxpayers who are eligible, Qualified Charitable Distributions (QCDs) remain unaffected by these changes. A QCD reduces taxable income directly and does not rely on itemized deductions, which makes it increasingly attractive in a framework where charitable deductions now have a floor and itemized deductions can be limited.
How I’d think about this going forward
None of these changes require dramatic shifts on their own. Where they matter is in years where income is meaningfully different than normal, or where deductions are a meaningful part of the tax picture.
For itemized deductions, the key change is that beginning in 2026, the tax benefit is no longer tied to the top marginal rate once income reaches the highest bracket. For SALT, the cap is higher for a limited window, but the benefit is income-sensitive and can fully phase out in higher-income years. For charitable giving, the introduction of a floor means the timing and structure of gifts now matter more than they used to.
The common theme is variability. The outcome is no longer determined just by what you paid or what you gave. It’s also determined by the type of income year you’re having and which thresholds apply in that year.
From a planning standpoint, that means these items are worth revisiting when income changes, not just when the return is being filed. A year with a large Roth conversion, significant capital gains, or a one-time liquidity event can materially change how these rules apply, even if nothing else changes.
Disclosure: This material is provided for general informational purposes only and is not intended as investment, tax, or legal advice. It does not constitute a recommendation or an offer to buy or sell any security. Past performance does not guarantee future results. Information is believed to be reliable but is not guaranteed.