Alert: The new law also contains some red flags. It’s important to notice them and react accordingly.

Here are six potential tax pitfalls in the OBBBA.

1. Personal exemptions. For decades, individuals could claim personal exemptions for themselves and qualified dependents. But this tax break is now gone for good. The Tax Cuts and Jobs Act (TCJA) suspended personal exemptions for 2018–2025 in conjunction with other individual changes. The OBBBA bans personal exemptions permanently. Tip: Status as a dependent or not is still important for the purpose of some other tax rules.

Link: https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors

2. Suspended deduction. For 2018–2025, the TCJA suspended deductions for: • Miscellaneous expenses • Casualty and theft losses (except for disaster-area losses) • Mortgage interest paid on up to $100,000 of home equity debt • Job-related moving expenses (except for active-duty military personnel). The new law makes these changes permanent. Tip: The OBBBA also permanently extends the lower $750,000 cap for home acquisition debt (down from $1 million before the TCJA). Interest on mortgage debt above the cap is generally nondeductible.

Link: https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors

3. Charitable deductions. Previously, you could deduct the full amount of your charitable donations, subject to generous limits. However, for the first time ever, the new law creates a charitable deduction “floor” for itemizers. How it works: Beginning in 2026, you can deduct only the amount of your otherwise deductible contributions above 0.5% of adjusted gross income (AGI). For example, if your AGI is $100,000 and you donate $5,000 to charity, your deduction is limited to $4,500. Tip: This may encourage you to accelerate some charitable gifts that you would otherwise make next year into this year.

Link: https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors

4. Please rule. The so-called “Pease rule” required higher-income taxpayers to reduce their itemized deductions by 3% for every dollar of taxable income above an annual threshold. In no case, however, could the reduction exceed 80% of the total value of itemized deductions. The Pease rule was suspended for 2018–2025. Starting in 2026, the OBBBA brings back a simpler itemized-deduction reduction that will impact taxpayers in the top 37% bracket.

Link: https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors

5. Home energy credits. The Inflation Reduction Act (IRA) approved two credits for home energy-efficient improvements. • Energy efficient home improvement credit: A 30% credit for qualified expenses like insulation, central air conditioners, water heaters, furnaces, heat pumps and home energy audits, subject to modest expenditure limits. • Residential clean energy credit: A 30% credit for the cost of new qualified clean energy property like solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells and battery storage technology. There are no expenditure limits on this credit. The new law repeals both credits. The repeal of the energy efficient improvement credit is effective for property placed in service after 2025. For the residential clean energy credit, repeal is effective for expenditures after 2025, regardless of when the property is placed in service. Tip: Homeowners should consider accelerating qualifying expenditures accordingly.

Link: https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors

6. Gambling losses. Before the OBBBA, you could deduct gambling losses for the year (including out-of-pocket expenses if you’re a professional gambler), but only to the extent of your winnings for the year. Effective for taxable years beginning after 2025, the OBBBA limits your gambling loss deduction to 90% of winnings. So if you lose $10,000 during the year and win $10,000, you’ll owe federal income tax on $1,000 ($10,000 of winnings offset by $9,000 of allowable losses), even though you only broke even.

Link: https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors