What is Pease Limitation?

The “Pease” limitation (named after the congressman who helped create it) refers to a limitation on itemized deductions. It reduces most itemized deductions by 3 percent of the amount by which a person’s adjusted gross income exceeds a specified threshold, up to a maximum reduction of 80 percent of all itemized deductions. In 2014, for married couples filing jointly, that amount is $305,050 and, for single taxpayers, it is $254,200. The Pease limitation on deductions includes mortgage interest, deductions for state and local taxes and charitable contributions, but not medical expenses, investment interest, casualty losses, theft or wagering losses.