Recent tax law changes bring a mix of good and bad news for individuals who itemize deductions. Some popular deductions are gone for good, while others remain available with new limits. Understanding what changed—and what strategies still work—can help you stay ahead at tax time.
The End of Miscellaneous Itemized Deductions
Under previous tax law, certain expenses could be claimed as “miscellaneous itemized deductions,” such as unreimbursed employee business expenses and investment fees. These deductions were temporarily suspended through 2025—but the new law makes that suspension permanent.
That means you can no longer deduct out-of-pocket business expenses you pay as an employee, even if they’re legitimate business costs. The solution is simple: have your corporation reimburse you for those expenses so you don’t lose the deduction entirely.
If you missed our recent posts, you can learn how this works in:
- How Corporate Owners Can Qualify for the Home Office Deduction
- How to Handle a Corporate Vehicle in Your Personal Name
Both explain how to turn once-personal deductions into legitimate corporate expenses reimbursed through an accountable plan—keeping the tax benefits alive despite changing rules.
What You Can Still Deduct
Even with the repeal of miscellaneous itemized deductions, there are still several categories that remain deductible for individuals who itemize on Schedule A. These include:
- Mortgage and home equity loan interest (subject to existing limits)
- State and local taxes, within the applicable cap
- Medical expenses that exceed the AGI threshold
- Charitable contributions to qualified organizations
- Casualty and theft losses from federally declared disasters
- Federal estate tax related to income in respect of a decedent
These deductions weren’t affected by the 2% of AGI rule before, and they remain intact under the new law.
New Limits for High-Income Taxpayers
Starting in 2026, high-income earners in the top tax bracket will see the value of their itemized deductions capped. The rule limits the benefit of those deductions to no more than 35% of their value once income exceeds the 37% bracket threshold. For example, if your taxable income crosses that threshold, the value of your itemized deductions will begin to phase out.
For 2025, the 37% tax bracket starts at $751,600 for joint filers and $626,350 for single filers. These thresholds will increase slightly each year with inflation, but the phase-out for high earners is here to stay.
Planning Ahead
The most effective strategy for itemizers moving forward is to plan ahead. If you have unreimbursed employee expenses—such as mileage, a home office, or professional tools—structure them as corporate reimbursements. That ensures those costs remain deductible at the business level rather than lost at the personal level.
Additionally, if your income is close to the top tax bracket, managing taxable income through timing strategies, retirement plan contributions, or business expense reimbursements can help you preserve more of your deductions.
The Takeaway
For individual taxpayers, the new law permanently closes the door on miscellaneous itemized deductions but leaves other key deductions untouched. For corporate owners and entrepreneurs, the best move is to shift unreimbursed business expenses to the corporate side, where they remain deductible.
Need help structuring reimbursements or planning for these changes? Ken-Mar Tax can help you create smart tax strategies that protect your deductions and keep your income where it belongs—in your pocket.
Small Business Tax Services
As an expert in small business tax services and tax consulting Ken-Mar Tax eats, sleeps and breathes small business tax strategies. Being an enrolled agent allows founder, Ken Weinberg, to represent you to the IRS - something only a CPA, tax attorney and Enrolled Agent can do. EAs are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. It also means he is continuously being updated on the new IRS tax codes and taking classes from the IRS that provide guidance on how to file returns so that they are not "flagged."
When you get your taxes prepared by Ken Mar Tax you also have the option to purchase the Tax Audit Protection Plan to avoid the extra costs of paying for audit representation. If you are audited by the IRS, State of Ohio or local taxing authorities, Ken-Mar Tax will meet with the taxing authorities on your behalf to negotiate a settlement for you. The fee covers all costs up to the Appeals level, including up to 15 hours of correspondence with the auditing party – either the IRS, State of Ohio or locality.
