What is the impact on the marginal tax rate due to the cutback in itemized deductions in 2013?
Well, starting in 2013, itemized deductions are reduced by 3% of excess of adjusted gross income for Single Taxpayers earning over $250,000 and for Joint filers earning over $300,000.
The good news here is that the itemized deductions cannot be reduced by more 80% due to the higher adjusted income.
There are some items of deductions in the itemized deductions that are not subject to any phaseouts. These exempt items are Medical Expenses, Investment Interest expenses, and casualty losses.
It seems that effect of these phaseouts will begin with taxpayers in the 28% tax bracket. Thus, these phaseouts could effectively contribute to an increase in marginal tax rates ranging from 2-4%.