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Publication 17

How Do You Figure the Limit?(p202)

If your itemized deductions are subject to the limit, the total of all your itemized deductions is reduced by the smaller of:
Before you figure the overall limit on itemized deductions, you first must complete Schedule A (Form 1040), lines 1 through 28, including any related forms (such as Form 2106, Form 4684, etc.).
The overall limit on itemized deductions is figured after you have applied any other limit on the allowance of any itemized deduction. These other limits include charitable contribution limits (chapter 24), the limit on certain meal and entertainment expenses (chapter 26), and the 2%-of-adjusted-gross-income limit on certain miscellaneous deductions (chapter 28).

Itemized Deductions Worksheet. (p202)

After you have completed Schedule A (Form 1040) through line 28, you can use the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040) to figure your limit. Enter the result on Schedule A (Form 1040), line 29. Keep the worksheet for your records.
You should compare the amount of your standard deduction to the amount of your itemized deductions after applying the limit. Use the greater amount when completing Form 1040, line 40. See chapter 20 for information on how to figure your standard deduction.


For tax year 2014 Bill and Terry Willow are filing a joint return on Form 1040. Their adjusted gross income on line 38 is $325,500. Their Schedule A itemized deductions are as follows:
Taxes paid—line 9$ 17,900
Interest paid*—lines 10, 11, and 1245,000
Investment interest expense—line 1441,000
Gifts to charity—line 1921,000
Job expenses—line 27 17,240
* If Congress extends the deduction for mortgage insurance premiums, any amount included on line 13 will be included in the total amount of interest paid.
The Willows’ investment interest expense deduction ($41,000 from Schedule A (Form 1040), line 14) is not subject to the overall limit on itemized deductions. The Willows use the Itemized Deductions Worksheet in the Schedule A (Form 1040) instructions to figure their overall limit. Of their $142,140 total itemized deductions, the Willows can deduct only $141,526 ($142,140 - $614). They enter $141,526 on Schedule A (Form 1040), line 29.