Schedule A (Form 1040) questions take center stage at TSU

Would you be ready if a client asked whether the higher state and local tax (SALT) cap means a bigger deduction in 2026? For higher-income clients, the answer may now depend on an additional limitation that reduces the benefit of itemized deductions.

Schedule A (Form 1040), Itemized Deductions, may look familiar, but the answers now depend on how several rules interact. NATP’s Tax Season Updates (TSU) brings these provisions together so tax professionals can move beyond “it depends” and explain what actually happens on the return. Use the TSU map to enter your ZIP code and find several in-person options nearby, or choose to attend virtually.

Why 37% does not always mean 37%

This question gets to one of the trickiest 2026 changes: How does §68 affect a client in the 37% bracket?

Beginning in 2026, §68 reduces otherwise allowable itemized deductions by 2/37 of the lesser of:

• The taxpayer’s total itemized deductions before applying §68
• The taxpayer’s taxable income, computed without §68 and increased by itemized deductions, that exceeds the threshold at which the 37% bracket begins

For 2026, this bracket begins when taxable income exceeds $640,600 for single taxpayers or $768,700 for married taxpayers filing jointly (MFJ). The §68 calculation is applied after other deduction limits, including the SALT cap.

The result can reduce the tax value of affected itemized deductions from 37% to as low as 35% for top-bracket income. It does not automatically reduce every top-bracket client’s deductions by 2/37. The amount depends on both the final itemized-deduction pool and how far the client’s income reaches into the 37% bracket.

Here is where a client’s projection matters. Tax professionals should avoid promising a 37% benefit based solely on the client’s marginal rate.

The SALT cap gives, then takes away

A client can therefore encounter the SALT phase-down before reaching the 37% bracket. If income continues to rise, §68 may then reduce the remaining itemized deductions. Year-end estimates should account for both calculations before the client accelerates a state estimated payment or real estate tax payment.

Look twice at familiar Schedule A deductions

Medical expenses remain deductible only to the extent they exceed 7.5% of AGI. Nursing home costs require a closer look at why the taxpayer entered the facility. Qualifying costs may include lodging and meals when medical care is the principal reason for the stay. Otherwise, the deduction may be limited to the portion attributable to medical or nursing care.

Mortgage interest depends on how the loan proceeds were used, not merely whether a residence secures the debt. Homeowners insurance and title insurance are not deductible on Schedule A. Beginning in 2026, qualified mortgage insurance premiums are treated as qualified residence interest, subject to the applicable rules and limits.

When a client receives a SALT refund, the tax benefit rule generally includes it in income only to the extent the earlier deduction reduced federal income tax. Review the prior-year return to determine how much the payment reduced federal income tax.

Run the projection when these flags appear

Run a deeper 2026 Schedule A projection when:

• MAGI is approaching or exceeds the SALT phase-down threshold
• Taxable income may enter the 37% bracket
• The client expects substantial SALT payments or a state tax refund
• Medical or nursing home expenses may clear the 7.5% AGI floor
• Home borrowing includes both residence improvements and personal expenditures

The goal is not to memorize every provision’s interaction. It is to recognize when the Schedule A total no longer tells you what the client actually saves.

NATP’s Tax Season Updates connect these rules with practical instruction and client examples. Open the TSU map and enter your ZIP code to see in-person events near you. Virtual Tax Season Updates events are also available. Choose what works for you and head into filing season ready to explain what Schedule A really delivers.