Case Study - Limit on Itemized Deductions
Boris and Natasha are married taxpayers who file jointly. In
2014, they had adjusted gross income (AGI) of $346,300 and itemized
deductions of $23,700. Their only allowable deductions were for home
mortgage interest, real estate taxes, and charitable contributions. Boris
and Natasha can deduct only $22,462, computed as follows:
| AGI |
$346,300 |
| Less: threshold amount |
-305,050 |
| Excess over threshold: |
$41,250 |
| Multiplier |
x .03 |
| Reduction required |
$ 1,238 |
| Unreduced deductions |
$ 23,700 |
| Less: reduction required |
- 1,238 |
| Deductions that may be claimed: |
$ 22,462 |
$1,238 is the less than $18,960 (80% of the affected itemized
deductions). Therefore, $1,238 is the required reduction amount. |
