Ask the Editor, December 19: Itemized Deductions

Each week, in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on topics submitted by readers. This week she's looking at five questions on itemized deductions claimed on Schedule A of Form 1040. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Valuation of donated publicly traded shares

Question: I am planning to donate shares in a publicly traded mutual fund to charity. What is the value of my donation for claiming a charitable contribution deduction on Schedule A of my Form 1040.

Joy Taylor: You would use the fair market value of the donated property on the day you donate your mutual fund shares. For charitable contributions of publicly traded stocks, bonds, mutual funds, etc., the fair market value of the donation is the average between the highest and lowest quoted selling price on the date of the contribution.

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IRS Publication 561 has more information on determining the value of donated property.

2. Higher SALT deduction cap

Question: When does the $40,000 cap on deducting state and local taxes (SALT) kick in? Does it apply to my 2025 Form 1040 if I itemize on Schedule A?

Joy Taylor: The “One Big Beautiful Bill” (OBBB) increased the cap for the SALT deduction on Schedule A of the federal income tax return from $10,000 to $40,000 for five years (2025-2029). So the higher limit will apply to your 2025 federal return that you file in 2026, provided you itemize on Schedule A of Form 1040 or 1040-SR. The cap for married couples who file separate returns is $20,000 apiece for 2025-2029.

There is an income limit. For 2025, the SALT write-off begins to phase out, but not below $10,000, for filers with modified adjusted gross incomes (modified AGI) over $500,000 ($250,000 for married couples who file separate returns). Modified AGI for this purpose is AGI plus any foreign earned income exclusion, foreign housing exclusion and certain income excluded from gross income because it was received from sources in Puerto Rico, American Samoa, Guam or the Northern Mariana Islands.

By law, the $40,000 cap and $500,000 modified AGI threshold increase 1% each year through 2029. For 2026 returns filed in 2027, the SALT deduction cap will be $40,400 and the income limit at which the deduction will begin to phase out will be modified AGI over $505,000. After 2029, the SALT deduction cap falls back to $10,000, unless Congress acts.

3. Home office

Question: My employer instituted a hybrid work policy. Each week, I have to work three days in my employer’s office and two days at home. Can I claim a home office deduction if I itemize on Schedule A of the Form 1040?

Joy Taylor: No. Prior to 2018, certain employees could deduct the cost of home office expenses as unreimbursed employee costs included in Schedule A miscellaneous itemized deductions, subject to the 2%-of-AGI threshold. The 2017 Tax Cuts and Jobs Act (TCJA) repealed this group of tax breaks through the end of 2025, and the OBBB permanently repealed them. So no, employees cannot claim the home office deduction.

The home office deduction is still available to self-employed people or independent contractors who file Schedule C with their Form 1040 and use a room or space in their house or apartment exclusively and regularly as their principal place of business.

4. Investment management fees

Question: Did the OBBB bring back the itemized deduction for fees I pay to my broker to manage my personal investment accounts, including my retirement accounts?

Joy Taylor: Unfortunately, no. These types of investment expenses used to be deductible as miscellaneous itemized deductions on Schedule A of the Form 1040 (subject to the 2%-of-AGI limit). But the TCJA temporarily eliminated that entire group of deductions through 2025, and the OBBB has permanently ended them.

5. Medical Expenses

Question: Did the OBBB make any changes to the medical expense deduction on Schedule A?

Joy Taylor: No, the OBBB made no changes to the medical expense deduction. Only taxpayers who itemize on Schedule A can deduct medical expenses, and only to the extent that the total amount exceeds 7.5% of AGI.

You might be interested in a congressional bill introduced by Senator Josh Hawley (R-Mo.). His bill would let nonitemizers deduct up to $25,000 of medical expenses, and it would also get rid of the 7.5%-of-AGI haircut. It is too soon to know whether this proposal will gain any traction in Congress next year.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

The Ask the Editor column is taking a two-week break for the holidays. We have already received many questions from readers on topics related to tax changes in the One Big Beautiful Bill, retirement accounts and more. We will continue to answer these in future Ask the Editor roundups, beginning with our first column in 2026, which we will publish on January 9. So keep those questions coming!

More Reader Questions Answered

• All Ask the Editor Q&As
• Ask the Editor: What Medical Expenses are Deductible?
• Ask the Editor: Tax Questions on Roth IRA Conversions
• Ask the Editor: Questions on SALT Deduction
• Ask the Editor: QCDs and Tax Planning
• Ask the Editor: Questions on Inherited IRAs