While the OBBBA keeps many current deduction rules in place, there are some significant changes coming, especially for higher-income taxpayers and anyone who gambles.
Standard Deduction Stays Put
The higher standard deduction amounts we covered earlier are permanent and will keep pace with inflation after 2025. Most taxpayers will continue to benefit from taking the standard deduction rather than itemizing.
New Limits on Itemized Deductions (Starting 2026)
If you’re in the highest tax bracket (37%), there’s a new restriction coming:
How it works: Starting in 2026, all your itemized deductions get reduced by a formula that essentially limits their tax benefit to 35% instead of 37%.
Who’s affected: Only taxpayers with income high enough to be in the 37% bracket.
Charitable Giving Changes
If you itemize (starting 2026):
- New rule: only charitable donations above 0.5% of your adjusted gross income are deductible
- Carryforwards from previous years only count if they help you exceed this new floor
If you take the standard deduction (starting 2026):
- Good news: you can deduct $1,000 (single) or $2,000 (married filing jointly) in charitable donations
- Must be cash donations to qualified charities
- Donor-advised funds and supporting organizations don’t qualify
- This gets added to your standard deduction
Gambling Loss Rule Changes
Here’s where it gets tricky for anyone who gambles regularly:
2025 rules: You can deduct gambling losses up to the amount of your winnings (current rule continues).
2026 and beyond: You can only deduct 90% of your losses, which can create “phantom income.”
Example: You have $30,000 in losses and $30,000 in winnings:
- 2025: Break even for tax purposes
- 2026+: Can only deduct $27,000 in losses, so you have $3,000 of taxable income despite breaking even
What This Means for Your Planning
The new itemized deduction limits mainly affect high earners starting in 2026. If you’re approaching that income level, we should discuss timing strategies for recognizing income and claiming deductions.
The charitable changes create a new planning opportunity for most taxpayers – starting in 2026, you can get the standard deduction plus a charitable deduction. For itemizers, the new floor means smaller donations might lose their tax benefit, so bundling contributions in alternating years could make sense.
If you gamble regularly, the 2026 rule changes could significantly impact your taxes. We should talk about how this might affect your situation and what adjustments you might need to make.
