Explain the Change in the Tax Treatment Regarding the Limitation

question 19

Short Answer

Explain the change in the tax treatment regarding the limitation of itemized deductions for high-income taxpayers.
The high income limitation on itemized deductions was phased out from 2006 through 2009.For 2014,this limitation on the amount of itemized deductions for high-income taxpayers is back in effect.High-income taxpayers' itemized deductions will be reduced by the lower of 3% of the excess of AGI over the applicable amount or 80% of the itemized deductions otherwise allowable for the tax year.

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Definitions:

Marginal Propensity To Save

The fraction of an increase in income that is saved rather than spent on consumption.

Recessionary Periods

Times characterized by a significant decline in economic activity across the economy, lasting more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

Tax Revenues

The income that is gained by governments through taxation, which is used to fund public services and government obligations.

National Income

The total amount of money earned within a country from the production of goods and services over a specific period of time.