Your Tax Question – 058

Dear John, I have recently gained employment that grants me a fairly large salary. I have heard of a thing called the “Pease” limitation of deductions for high wage earners. At which point in my income will this Pease limitation affect me? Thanks, Evelyn
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Hi Evelyn,

Congrats on the new job!

For high wage earners the Pease limitation was adopted by Congress to decrease the amount of the income deductions of higher wage earners. It was a 3% reduction on an amount over a specified AGI.

In 2001 the Pease limitation was scheduled to be phased out over time until in 2010 it was eliminated completely. It was set to be reinstated for 2011 but the 2010 Tax Relief Act that was adopted by Congress on December 17^th, 2010 eliminated it all together for another 2 years – until December 31, 2012.

So I say all this to inform you that the Peace limitation on deductions will not affect you until your 2013 taxes. We’ll see what happens then.

Enjoy,
John