Pease Limitation
A term to know.
The Omnibus Reconciliation Act of 1990 added Section 68(a), whereby a taxpayer whose adjusted gross income exceeded a threshold amount had to reduce itemized deductions by the lesser of 3% of that excess, or 80% of itemized deductions otherwise allowable.
The threshold amount was initially $100,000 in 1990 when introduced by Donald J. Pease (D-13th District, OH). It has been modified over the years, reaching (under ATRA) $251,000 for single taxpayers and $313,800 for married filing jointly in 2017 (indexed for inflation). The TCJA eliminated the Pease Limitation from 2018 to 2025.
OBBB changed the rules completely, inserting a limitation on itemized deductions of 2/37 (effectively, 5.4%) for taxpayers in the highest income tax brackets (37% in 2026). Ostensibly, this reduction applied to trusts and estates (as well as individuals) because OBBB eliminated Sec. 68(e), which excluded trusts and estates.