Understanding the OBBB Itemized Deduction Limitations and the Medical Expenses Deduction

The TCJA suspended the pre-existing Pease limitation that limited the value of itemized deductions for high income taxpayers. The Pease limitation did not apply to the medical expense deduction, which allows taxpayers to take an itemized deduction for medical expenses in excess of 7.5% of the taxpayer's adjusted gross income. The 2025 One Big Beautiful Bill Act (OBBB) did not restore the Pease limitation. However, the law did create a new cap on itemized deductions that will impact high-income clients. While the pre-existing Pease limitation is repealed, starting in 2026, a new limit reduces the itemized deductions by 2/37 of the lesser of the taxpayer's (1) total itemized deductions or (2) amount of taxable income exceeding the 37% rate bracket.Post-OBBB, the medical expense deduction is no longer exempt from the limitation. For more information on the limitation on itemized deductions, visit Tax Facts Online. Read More: Link to Q8528. Note: Q is updated.