In the recent tax legislation to avoid the fiscal cliff, Congress reinstated a limitation on itemized deductions for affluent taxpayers, known as Pease (after its original author, the late Rep. Donald Pease). Under Pease, itemized deductions are modestly reduced depending on how much a taxpayer’s adjusted gross income exceeds a specified threshold — $250,000 for an individual and $300,000 for a married couple.
Many commentators have voiced concerns that Pease will discourage wealthy taxpayers from making charitable donations. However, these concerns are misguided. Even under Pease, virtually all affluent taxpayers will be able to get the full deduction for any additional gifts to charity.