Dictionary of Business Terms: itemized deduction limitation
itemized deduction limitation
taxpayers with Adjusted Gross Income (AGI) in excess of a prescribed threshold are required to reduce their otherwise allowable itemized deductions. The required reduction equals 3% of the amount by which the taxpayer's AGI exceeds the prescribed threshold. For 2006, the prescribed threshold is $150,500. The threshold for subsequent years will be indexed for inflation. Otherwise allowable deductions, however, cannot be reduced by more than 80%. Further, the reduction does not apply to medical expenses, casualty and theft losses, investment interest, and gambling losses. This limit will be phased out and entirely repealed after 2009.
