What is the Pease limitation on itemized deductions?

The Pease limitation reduced total itemized deductions by 3% of adjusted gross income above a threshold, up to 80% of total deductions. It applied to high earners and affected Schedule A items, including mortgage interest, charitable contributions, and state taxes. The One Big Beautiful Bill Act permanently eliminated it under Sec. 70111, replacing it with a new cap that reduces itemized deductions by 2/37 of the lesser of total deductions or taxable income above the 37% bracket. Sell your home planning helps homeowners model how this new cap affects their Schedule A position.

Related Terms

What are Itemized deductions?

What is the SALT deduction cap?

What is a Marginal tax rate?

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Tax loss harvesting

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Child traditional IRA

Open a Traditional IRA for children with earned income. Contribute up to $7,000 annually with full deduction, giving them decades to grow tax-free.

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Employee achievement awards

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Health reimbursement

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Child & dependent tax credits

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Health savings account

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Sell your home

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Employee achievement

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Hiring kids

Reduce taxable income & self-employment tax by hiring your kids.

Home office

Deduct qualified expenses for using your home for business purposes.

Meal expenses

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Travel expenses

Businesses can deduct necessary travel expenses, like airfare and lodging, directly related to operations for tax savings.

Vehicle expenses

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Late S election

A Late S Election lets a corporation request IRS S corp status post-deadline.

Late C election

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Depreciation

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R&D tax credit

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Clean vehicle

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Residential clean energy

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Augusta rule

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Roth 401k

Roth 401(k) lets employees and individuals make after-tax retirement contributions, offering tax-free growth and withdrawals.

Traditional 401k

Traditional 401(k) plans offer pre-tax retirement savings for employees, with companies reducing taxable income via contributions.