The 2026 tax year brings notable changes to itemized deductions that will affect many taxpayers, particularly those in higher tax brackets. Beginning with returns filed in 2027, certain itemized deductions—including mortgage interest and property taxes—will be subject to percentage reductions, commonly referred to as “haircuts.” These reductions scale based on income levels, meaning higher earners will see larger percentage limitations applied to these traditionally valuable deductions.

The mechanics of these haircuts operate on a graduated basis. Mortgage interest deductions and property tax deductions will face reduction percentages that increase as adjusted gross income rises. For taxpayers who have historically maximized these deductions, the impact can be substantial. The changes represent a fundamental shift in how these deductions function within the overall tax calculation.

From a planning perspective, taxpayers should work with their advisors to model how these haircuts will affect their specific situations. The reduced benefit of itemized deductions may influence decisions around charitable giving strategies, refinancing considerations, and overall tax planning approaches. Understanding your exposure to these limitations early in the year provides the greatest flexibility for strategic responses.