The Limit on Itemized Deductions
Unfortunately, at higher levels of income, your hard-won and
carefully documented 2014 itemized deductions will be partially phased
out, and you won't be able to deduct them in the current year -- or
ever. Taxpayers with adjusted gross income (AGI) over a threshold
amount must reduce their itemized dedcutions by the lesser of:
- 3% of the amount of the AGI above the threshold amount; or
- 80% of allowable itemized deductions affected by this overall
limit.
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Tip Regardless of whether your itemized deductions
are phased out, you always have the option of using the standard deduction
for your filing status, which remains the same no matter how high
your income rises. |
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The adjusted gross income (AGI) levels at which the
phaseout of itemized deductions begins are adjusted annually for inflation.
For 2014, they are:
- $305,050, for married people filing jointly;
- $152,525, for marrieds filing separately;
- $279,650, for head of household; and
- $254,200, for single taxpayers.
If your AGI as shown on Line 37 of your tax return is higher
than the applicable threshold, you have to subtract the threshold
amount from your income. The remaining amount of AGI is multiplied
by 3 percent. The answer you get is subtracted from the total amount
of affected deductions, and you can only deduct the remainder. However,
in no event will your deductions be reduced by more than 80 percent
of their value. |
