A “tax-the-rich” provision in the new law reduces the value of itemized deductions for 37 percent taxpayers. The provision would replace current law’s Pease limitation on the value of itemized deductions.

Generally, the provision would require taxpayers in the 37 percent tax bracket to reduce the amount of their itemized deductions by 2/37 of the lesser of the amount of itemized deductions, or so much of the taxpayer’s taxable income as exceeds the dollar amount at which the 37 percent bracket begins. This limitation applies after the application of any other limitation on the allowance of itemized deduction (e.g., the charitable contribution deduction).

Prospects: Expect implementing regulations/guidance from the Treasury Department on this provision in the near future.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org