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PEP and Pease

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PEP and Pease

PEP and Pease are two provisions in the tax code that increase taxable income for high-income earners. PEP is the phaseout of the personal exemption and Pease (named after former Senator Donald Pease) phases out the value of most itemized deductions once a taxpayer’s adjusted gross income reaches a certain amount.

The income threshold for both PEP and Pease will increase from last year to $261,500 for single filers and $318,800 for married couples filing jointly (Tables 5 and 6). PEP will end at $384,000 for singles and $436,300 for married couples filing jointly (both will increase from 2016), meaning that taxpayers with AGI above these limits will no longer benefit from personal exemptions.

Table 5. 2017 Pease Limitations on Itemized Deductions

Filing Status Income
Single $261,500
Married Filing Jointly $313,800
Head of Household $287,650
Married Filing Separately $156,900
Source: IRS.
Table 6. 2017 Personal Exemption Phaseout

Filing Status Phaseout Begins Phaseout Complete
Single $261,500 $384,000
Married Filing Jointly $313,800 $436,300
Head of Household $287,650 $410,150
Married Filing Separately $156,900 $218,150
Source: IRS.

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