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Crew52
New Member

My itemized deductions appear to be capped. My income does not breach the threshold to begin phasing out itemized deductions. What might be the issue?

My itemized deductions appear to be capped. My income does not breach the threshold to begin phasing out itemized deductions. What might be the issue?

1 Reply
AnthonyC
Level 7

My itemized deductions appear to be capped. My income does not breach the threshold to begin phasing out itemized deductions. What might be the issue?

If you mean that you are not seeing any further increase in your refund from entering itemized deductions - 

Limited to tax liability

Itemized deductions, such as property taxes, can only reduce your taxable income - they won't provide you with a direct refund.  So, you can reach a point where between all your deductions and credits, you simply may not have any further tax liability to reduce.  Thus, you won't see any further tax benefit from your deductions in these situations.  This can often be the case when you have tax credits, such as the Child Tax Credit, that eat up a lot of your tax liability.


You could also be subject to the Alternative Minimum Tax even if your income isn't high enough for the phaseout of the itemized deductions.  

While the rules and calculations for the AMT are quite complex, the basic result is the tax benefits you receive from certain deductions (like property taxes) are then wiped out by an increase in tax liability in the form of the AMT.  So, as you enter more itemized deductions, your AMT liability increases proportionately causing there to be no effect on your refund total.  You can read more information about the AMT at these links -


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