The limitation for itemized deductions claimed on tax year 2014 returns of individuals begins with incomes of $254200 or more ($305050 for married couples filing jointly). If your Adjusted Gross Income (AGI) is above this threshold several of your itemized deductions will be limited (phased-out) except for medical and dental investment interest gambling losses and losses for casualty or theft.
If that limitation applies to you your itemized deductions will be reduced by the lesser of: three percent of the adjusted gross income that exceeds the threshold or 80 percent of the allowable itemized deduction. A worksheet has been included with Schedule A to help determine the amount of deductions allowable if you cross the threshold.
The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) (2001) eliminated the limitation and was extended by the 2010 Tax Relief Act. However the 2010 Tax Relief Act had a sunset provision that ended the limitation elimination on January 1 2013. New legislation effective January 1 2013 was introduced by the federal government to raise the limiting threshold to returns of individuals with incomes of $250000 or more ($300000 for married couples filing jointly) and indexed yearly for inflation. However Kentucky has not updated to the current code and is subject to the original limit of $100000 adjusted for inflation.
Schedule A Limitations can be confusing to understand without a trusted tax advisor on your side. If you are looking for a CPA to help you during tax season and beyond contact Lindemeyer CPA to schedule a first consultation.