Filing season is upon us– April is one short month away!
As a reminder, the Pease Limit is now in effect and couples with an adjusted gross income (AGI) of $300,000 or more and single filers with an AGI of $250,000 or more can expect to experience limitations placed on itemized deductions.
As Forbes magazine reported in June of 2013:
“…Pease limitation was first incorporated into the Omnibus Budget Reconciliation Act of 1990 and it is named after former Congressman Donald Pease. The purpose of the Pease limitation was to raise revenue by limiting …common itemized deductions among high-income earners. Pease limitations aim to reduce the benefit of the following itemized deductions:
- Charitable Contributions
- Mortgage Interest
- State, Local, and Property Taxes
- Miscellaneous Itemized Deductions”
Here is a hypothetical example of how the Pease Limit could affect a taxpayer:
Taxpayer Henry Wilson is single, with no dependents. Wilson has an AGI of $450,000 ($350,000 earned, ordinary, non-investment income, and $100,000 of net investment income).
Deductions:
- Charitable = $10,000
- Property Taxes = $17,000
- Mortgage Interest = $15,000
- Total = $42,000
Wilson’s itemized deductions would be limited to $36,000 ([$450,000 – $250,000] x 3 percent = $6,000 reduction to itemized deductions for 2013).
The Maddox Thomson team is always here to help.
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