So… The fiscal cliff deal will cap itemized deductions. I believe the cap rule will be as follows.
If your AGI is
$250k for single filers
$300k for joint filers
$275k for head of houshold
your itemized deduction will be reduced by the lesser of either
a) 3% of the amount of you above your AGI
or
b) 80% of your itemized deduction amount
So using the governments new definition of “rich”
$400k AGI for single
$450k AGI for couples
* If single, their itemized deduction will be reduced by (400-250)k * 0.03 = $4500
* If couple, itemized deduction reduced by (450-300)k *0.03 = $4500
* If HofH, itemized deduction reduced by (400-275)k *0.03= $3750
Interesting to note though… if you live in CA, and have a huge property tax and state income sales tax, depending what has been revised by the AMT (which I’ll figure out), this might not matter to anyway, because at those income levels, changes are AMT is kicking in most likely before being hit with these itemized deduction caps…
So higher w-2 income earners are probably ok with this, up to the governments new definition of “rich” threshold
