New Itemized Deduction Limits Could Increase Taxes for High-Income Earners in 2026

Beginning in 2026, people with high incomes might get less tax savings as the new itemized deduction limit is set to take effect. Although deductions for things like charitable gifts, mortgage interest, medical costs, and state and local taxes will still be available, their overall benefit may decrease for those in the highest federal tax bracket.

What’s Changing?

Beginning in 2026, taxpayers in the top 37% federal tax bracket will face a new limitation that reduces the overall tax savings those deductions provide.

For 2026, the 37% tax bracket is expected to begin at:

• $640,600 for single filers and heads of household

• $768,700 for married couples filing jointly

• $384,350 for married taxpayers filing separately

What Does This Mean in Practice?

The new rule essentially reduces the tax value of itemized deductions for taxpayers in the top bracket from 37% down to about 35%.

For example, if a taxpayer in the highest bracket claims $50,000 in itemized deductions, the deductions will still help reduce taxes, but the savings may be smaller than they would have been under current rules.

While the calculations behind the limitation are fairly technical, the takeaway is straightforward: high-income individuals may not receive the same level of tax benefit from deductions this tax year.

Additional Ways to Reduce the Impact

For some taxpayers, lowering taxable income this year will help reduce the effect of the deduction limitation. Possible strategies to consider include:

• Increasing retirement plan contributions

• Delaying income where possible

• Avoiding unnecessary Roth conversions

• Harvesting investment losses

• Reviewing business income strategies for pass-through entities or sole proprietorships

Don’t Wait until Year-End

If you expect your income could place you in the top tax bracket this year, proactive planning will help reduce your overall tax burden. Reviewing your options now can create more flexibility.