The Return of Itemized Deductions: How Tax Strategy is Shifting for Homeowners in 2025

🏡 Why 2026 Could Be the Year Itemizing Deductions Returns

If you’ve bought a home recently or are planning to in 2026, you might be part of an unexpected tax comeback story: the return of itemized deductions.

How Rising Mortgage Costs and New Tax Law Changes Are Shifting the Tax Landscape for Homeowners

For years, the doubled standard deduction under the Tax Cuts and Jobs Act (TCJA) made itemizing nearly obsolete. Most taxpayers found that the standard deduction saved them more time and gave them equal or better results than tracking every charitable receipt and property-tax bill.

Mortgage Rates from Freddie Mac, Oct 2025

But the financial landscape has shifted. Mortgage rates are hovering around 6¼ percent, property taxes have climbed alongside home values, and Congress’ new “One Big Beautiful Bill Act” has made all TCJA itemized-deduction rules permanent with temporary expansions to key deduction caps.

The result? Many homeowners, especially those taking on new mortgages, could once again see real savings from itemizing.

I was just speaking to a great mortgage broker, Patty Williamson at Silverton Mortgage, and she told me that the new jumbo mortgage threshold for 2026 is going to be $819,000. A mortgage under that threshold is now conventional and over that threshold is a jumbo mortgage.

💰 Standard vs. Itemized Deduction in 2025: Key Numbers

Let’s run the math.

• Standard Deduction (2025) → $31,500 (Married Filing Jointly) | $15,750 (Single)

• Standard Deduction (2026) → $32,200 / $16,100 after inflation adjustment

• Example: An $800,000 mortgage at 6.25% creates roughly $50,000 in annual mortgage interest.

• Add in $8,000–$12,000 in property taxes and another few thousand in charitable gifts, and your total deductions can easily top $60,000—double the standard deduction.

For the first time in nearly a decade, homeowners in mid-to-high-cost areas could once again benefit from itemizing.

Possible standard deduction compared to itemized deduction

🧾 Major Itemized Deductions to Watch in 2025

The One Big Beautiful Bill Act didn’t overhaul itemized deductions. It made prior TCJA changes permanent and added a few strategic tweaks worth knowing:

1. Medical Expenses

You can deduct medical and dental expenses above 7.5% of your AGI. For many business owners with fluctuating income, bunching large medical payments into a single year can help surpass this threshold.

Sometimes these are better handled through the various kinds of medical reimbursement plans available to businesses.

2. State and Local Taxes (SALT)

The infamous $10,000 cap is temporarily expanded up to $40,000 through 2028 based on modified AGI phase-outs.

High-income homeowners in states like California, New York, and Georgia can capture a bigger portion of their property and state income taxes before the cap snaps back.

3. Mortgage Interest

Interest remains deductible on up to $750,000 of acquisition debt for most new loans, but rising home prices and jumbo thresholds mean this deduction is relevant again.

With 2026’s jumbo loan limit set around $819,000, buyers staying below that line can take full advantage of conventional loan rules and maximize interest deductions.

4. Charitable Contributions

Cash donations to qualified organizations remain deductible up to 60% of AGI. Charitable bunching, combining several years’ donations into one, can push you over the standard deduction threshold.

Note: if you are over age 70, taking required minimum distributions (RMDs) as qualified charitable distributions might still be more tax-efficient than receiving the money and then donating.

5. Casualty and Theft Losses

Still limited to federally declared disaster areas, so your burst pipe or stolen laptop doesn’t count unless tied to a disaster declaration.

6. Miscellaneous Itemized Deductions

Gone for good. That means no more unreimbursed employee expenses or deductions for W-2 home-office use unless you’re self-employed. (Some states, like California, still allow them at the state level.)

📈 Who Will Benefit Most from the Return of Itemized Deductions?

Itemizing now favors three fast-growing groups:

New Homeowners & Upgrades

Anyone purchasing a home with mid-to-large mortgage.

High-Income Professionals

Those bumping against the SALT phase-out thresholds can plan deductions across years for maximum value.

Entrepreneurs and Self-Employed Owners

With variable income, they can strategically “stack” deductible expenses to control taxable income.

For the empowered solopreneur, this represents more than a math problem, it’s an opportunity to regain control of their tax strategy and align it with long-term wealth goals.

⚙️ 5 Smart Tax Strategies to Maximize Your Itemized Deductions

1. Run a Projection Now.

Use your 2024 tax return as a baseline. Plug in new mortgage interest and property tax data to see if itemizing beats the standard deduction.

2. Bunch Charitable Giving.

Combine two years of donations into one tax year to exceed the standard deduction threshold. A Donor-Advised Fund (DAF) can help manage timing.

3. Track Medical and State Taxes.

Pay property tax installments or medical bills in the same calendar year to maximize deductibility.

4. Consider Refinance Timing.

If you’re locking in a new mortgage, review interest deductibility and points paid with your advisor before closing. That small timing difference can change your tax outcome.

5. Keep Good Records.

The IRS loves paperwork because they know that most people don't do it. Maintain clear records and digital receipts. A clean paper trail is your best friend if the IRS asks questions.

🌱 From Tax Break to Wealth Strategy

Itemizing isn’t just about getting a bigger refund this year, it’s about designing your financial blueprint.

By leveraging mortgage interest, SALT expansions, and charitable contributions strategically, you create a clearer path to the bigger picture:

• Financial Empowerment and Control Turning anxiety about taxes into decisive strategy.

• Legacy Building Reinvesting tax savings into property growth, college funds, or family trusts.

• Freedom Through Systems Streamlined record-keeping and proactive planning that let you focus on your business and life.

At Tax Sherpa, we believe every deduction is a decision about your future freedom. When you itemize with intention, you don’t just save money, you build momentum.

🚀 Will Itemizing Deductions Pay Off for You in 2025?

If you’re wondering whether 2026 will be the year itemizing makes sense again, don’t wait until tax season to find out.

Schedule a personalized deduction strategy session with Tax Sherpa to model your scenario and see how much clarity and cash flow you can reclaim.

Because the goal isn’t just to check the box at filing time,
it’s to build a tax strategy that fuels your financial freedom for years to come.

🧭 Key Takeaway: Strategic Tax Planning for the New Deduction Era

Itemized deductions are no longer a relic of the past. With higher mortgage rates, expanded SALT caps, and a renewed focus on strategic planning, they’re a powerful tool for those ready to play offense with their tax strategy ethically, proactively, and with confidence.