Case Study - Limit on Itemized Deductions
Boris and Natasha are married taxpayers who file jointly. In 2005, they had adjusted gross income (AGI) of $339,450 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 $17,797.50, computed as follows:
| AGI |
$339,450 |
| Less: threshold amount |
-142,700 |
| Excess over threshold: |
$196,750 |
| Multiplier |
x .03 |
| Reduction required |
$ 5,902.50 |
| Unreduced deductions |
$ 23,700 |
| Less: reduction required |
- 5,902.50 |
| Deductions that may be claimed: |
$ 17,797.50 |
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