Are there income phaseouts or new caps for itemized deductions under the 2025 law?

1. SALT: a larger dollar cap plus an income-triggered phaseout

Congress temporarily increased the SALT cap from the TCJA-era $10,000 to $40,000 for the 2025 tax year (with the statutory temporary window extending through 2029), but lawmakers also built an income‑based phaseout into that increase — taxpayers with modified adjusted gross income (MAGI) above a threshold see their allowable SALT deduction reduced, with the deduction fully phased down to $10,000 when MAGI reaches $600,000 for joint filers in 2025 (with a $300,000 threshold for separate filers); the MAGI trigger started at $500,000 in 2025 and increases by 1% per year for 2026–2029 under the statutory schedule ^{[1] [4] [5]}.

2. How the SALT phasedown works in practice

The mechanics described in practitioner guidance show the $40,000 cap is not an unconditional windfall for high earners: once MAGI exceeds the initial threshold (e.g., $500,000 in 2025), the allowable SALT deduction is reduced by a set percent of each dollar over the threshold (Thomson Reuters explains a 30% reduction per dollar over the trigger in example calculations), so very high‑income filers can effectively be pushed back toward the old $10,000 limit as MAGI approaches the statutory full‑phaseout point ^[1].

3. Other itemized-deduction changes and timing

OBBB does more than touch SALT: it restores and adjusts a suite of itemized‑deduction rules that had been altered by the 2017 Tax Cuts and Jobs Act and its aftermath — for example, charitable contribution ceilings are changed with new percentage limits kicking in in 2026, the mortgage interest cap was made permanent, and new targeted deductions (tips, certain vehicle‑loan interest, an extra senior deduction) were created that themselves may carry MAGI phaseouts or eligibility rules ^{[2] [6] [3]}. IRS and professional guidance highlight that some of these limits or new deductions phase in or become stricter after 2025, so the landscape for itemizing shifts over 2025–2026 ^{[2] [3]}.

4. Is there a new universal “cap” on all itemized deductions?

Legislative and policy analyses considered — and some bill versions proposed — broader limits on the aggregate value of itemized deductions (a Pease‑style or percent‑of‑income cap), and commentators and policy shops argued for such a backstop to offset the revenue effects of relaxing SALT ^{[7] [8]}. However, the enacted 2025 law, as reflected in IRS and tax‑practice guidance cited here, primarily uses dollar caps and targeted phaseouts (SALT and category‑specific rules) and does not in 2025 impose a new single aggregate cap across all Schedule A entries in the manner some proposals suggested ^{[1] [3] [9]}.

5. Practical implications and uneven benefits

Taken together, the changes mean middle‑ and many upper‑middle‑income filers see larger room to deduct state and local taxes in 2025, while very high‑income taxpayers face guarded relief because of the MAGI phaseout; simultaneously, charities and tax planners are watching 2026 changes (charitable ceilings and other percentage‑of‑AGI limits) that may reduce the after‑tax value of giving for higher earners, and the IRS stresses phased implementation and reporting rules that could affect withholding and information returns ^{[1] [2] [6]}.

6. Limits of available reporting

The sources used cover the statutory SALT increase and its MAGI phaseout mechanics, IRS guidance on which provisions apply in 2025 versus 2026, and analyses of possible aggregate caps; they do not provide every numeric formula for every deduction category or final Treasury regulatory texts that could refine phaseout percentages, so precise tax calculations for complex returns still require reading the statute and later IRS regs or adviser input ^{[1] [3] [2]}.