26 U.S.C. § 68 — Overall limitation on itemized deductions

Page 460 TITLE 26—INTERNAL REVENUE CODE § 68 any taxable year beginning after December 31, 2017, and before January 1, 2026. (Added Pub. L. 99–514, title I, § 132(a), Oct. 22, 1986, 100 Stat. 2113; amended Pub. L. 100–647, title I, § 1001(f), title IV, § 4011(a), Nov. 10, 1988, 102 Stat. 3351, 3655; Pub. L. 101–239, title VII, § 7814(f), Dec. 19, 1989, 103 Stat. 2414; Pub. L. 103–66, title XIII, § 13213(c)(2), Aug. 10, 1993, 107 Stat. 474; Pub. L. 105–277, div. J, title IV, § 4004(b)(1), Oct. 21, 1998, 112 Stat. 2681–910; Pub. L. 106–554, § 1(a)(7) [title III, § 319(2)], Dec. 21, 2000, 114 Stat. 2763, 2763A–646; Pub. L. 115–97, title I, § 11045(a), Dec. 22, 2017, 131 Stat. 2088.) Editorial Notes REFERENCES IN TEXT Section 4 of the Securities Act of 1933, referred to in subsec. (c)(2)(B)(i)(I), is classified to section 77d of Title 15, Commerce and Trade. AMENDMENTS 2017—Subsec. (g). Pub. L. 115–97 added subsec. (g). 2000—Subsec. (f). Pub. L. 106–554 substituted ‘‘the sec- ond sentence’’ for ‘‘the last sentence’’. 1998—Subsec. (b)(3). Pub. L. 105–277 substituted ‘‘for casualty or theft losses described in paragraph (2) or (3) of section 165(c) or for losses described in section 165(d)’’ for ‘‘for losses described in subsection (c)(3) or (d) of section 165’’. 1993—Subsec. (b)(6) to (13). Pub. L. 103–66 redesignated pars. (7) to (13) as (6) to (12), respectively, and struck out former par. (6) which read as follows: ‘‘the deduc- tion under section 217 (relating to moving expenses),’’. 1989—Subsec. (c)(4). Pub. L. 101–239 struck out par. (4) which read as follows: ‘‘TERMINATION.—This subsection shall not apply to any taxable year beginning after De- cember 31, 1989.’’ 1988—Subsec. (b)(4). Pub. L. 100–647, § 1001(f)(2), sub- stituted ‘‘deductions’’ for ‘‘deduction’’ and inserted be- fore comma at end ‘‘and section 642(c) (relating to de- duction for amounts paid or permanently set aside for a charitable purpose)’’. Subsec. (c). Pub. L. 100–647, § 4011(a), amended subsec. (c) generally. Prior to amendment subsec. (c) read as follows: ‘‘The Secretary shall prescribe regulations which prohibit the indirect deduction through pass- thru entities of amounts which are not allowable as a deduction if paid or incurred directly by an individual and which contain such reporting requirements as may be necessary to carry out the purposes of this sub- section. The preceding sentence shall not apply— ‘‘(1) with respect to cooperatives and real estate in- vestment trusts, and ‘‘(2) except as provided in regulations, with respect to estates and trusts.’’ Pub. L. 100–647, § 1001(f)(4), amended last sentence gen- erally. Prior to amendment, last sentence read as fol- lows: ‘‘The preceding sentence shall not apply with re- spect to estates, trusts, cooperatives, and real estate investment trusts.’’ Subsec. (e). Pub. L. 100–647, § 1001(f)(3), amended sub- sec. (e) generally. Prior to amendment, subsec. (e) read as follows: ‘‘For purposes of this section, the adjusted gross income of an estate or trust shall be computed in the same manner as in the case of an individual, except that the deductions for costs which are paid or incurred in connection with the administration of the estate or trust and would not have been incurred if the property were not held in such trust or estate shall be treated as allowable in arriving at adjusted gross income.’’ Subsec. (f). Pub. L. 100–647, § 1001(f)(1), added subsec. (f). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2017 AMENDMENT Pub. L. 115–97, title I, § 11045(b), Dec. 22, 2017, 131 Stat. 2088, provided that: ‘‘The amendment made by this sec- tion [amending this section] shall apply to taxable years beginning after December 31, 2017.’’ EFFECTIVE DATE OF 1998 AMENDMENT Pub. L. 105–277, div. J, title IV, § 4004(c)(2), Oct. 21, 1998, 112 Stat. 2681–911, provided that: ‘‘The amendment made by subsection (b)(1) [amending this section] shall apply to taxable years beginning after December 31, 1986.’’ EFFECTIVE DATE OF 1993 AMENDMENT Amendment by Pub. L. 103–66 applicable to expenses incurred after Dec. 31, 1993, see section 13213(e) of Pub. L. 103–66 set out as a note under section 62 of this title. EFFECTIVE DATE OF 1989 AMENDMENT Amendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1988 AMENDMENT Amendment by section 1001(f) of Pub. L. 100–647 effec- tive, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title. Pub. L. 100–647, title IV, § 4011(b), Nov. 10, 1988, 102 Stat. 3656, provided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1987.’’ EFFECTIVE DATE Section applicable to taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. L. 99–514, set out as an Effective Date of 1986 Amendment note under sec- tion 1 of this title. 1-YEAR DELAY IN TREATMENT OF PUBLICLY OFFERED REGULATED INVESTMENT COMPANIES UNDER 2-PER- CENT FLOOR Pub. L. 100–203, title X, § 10104(a), Dec. 22, 1987, 101 Stat. 1330–386, provided that: ‘‘(1) GENERAL RULE.—Section 67(c) of the Internal Revenue Code of 1986 to the extent it relates to indirect deductions through a publicly offered regulated invest- ment company shall apply only to taxable years begin- ning after December 31, 1987. ‘‘(2) PUBLICLY OFFERED REGULATED INVESTMENT COM- PANY DEFINED.—For purposes of this subsection— ‘‘(A) IN GENERAL.—The term ‘publicly offered regu- lated investment company’ means a regulated invest- ment company the shares of which are— ‘‘(i) continuously offered pursuant to a public of- fering (within the meaning of section 4 of the Secu- rities Act of 1933, as amended (15 U.S.C. 77a to 77aa) [15 U.S.C. 77d]), ‘‘(ii) regularly traded on an established securities market, or ‘‘(iii) held by or for no fewer than 500 persons at all times during the taxable year. ‘‘(B) SECRETARY MAY REDUCE 500 PERSON REQUIRE- MENT.—The Secretary of the Treasury or his delegate may by regulation decrease the minimum share- holder requirement of subparagraph (A)(iii) in the case of regulated investment companies which experi- ence a loss of shareholders through net redemptions of their shares.’’ § 68. Overall limitation on itemized deductions (a) General rule In the case of an individual whose adjusted gross income exceeds the applicable amount, the amount of the itemized deductions otherwise al- Page 461 TITLE 26—INTERNAL REVENUE CODE § 68 lowable for the taxable year shall be reduced by the lesser of— (1) 3 percent of the excess of adjusted gross income over the applicable amount, or (2) 80 percent of the amount of the itemized deductions otherwise allowable for such tax- able year. (b) Applicable amount (1) In general For purposes of this section, the term ‘‘ap- plicable amount’’ means— (A) $300,000 in the case of a joint return or a surviving spouse (as defined in section 2(a)), (B) $275,000 in the case of a head of house- hold (as defined in section 2(b)), (C) $250,000 in the case of an individual who is not married and who is not a surviving spouse or head of household, and (D) 1⁄2 the amount applicable under sub- paragraph (A) (after adjustment, if any, under paragraph (2)) in the case of a married individual filing a separate return. For purposes of this paragraph, marital status shall be determined under section 7703. (2) Inflation adjustment In the case of any taxable year beginning in calendar years after 2013, each of the dollar amounts under subparagraphs (A), (B), and (C) of paragraph (1) shall be increased by an amount equal to— (A) such dollar amount, multiplied by (B) the cost-of-living adjustment deter- mined under section 1(f)(3) for the calendar year in which the taxable year begins, ex- cept that section 1(f)(3)(A)(ii) shall be ap- plied by substituting ‘‘2012’’ for ‘‘2016’’. If any amount after adjustment under the pre- ceding sentence is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50. (c) Exception for certain itemized deductions For purposes of this section, the term ‘‘itemized deductions’’ does not include— (1) the deduction under section 213 (relating to medical, etc. expenses), (2) any deduction for investment interest (as defined in section 163(d)), and (3) the deduction under section 165(a) for cas- ualty or theft losses described in paragraph (2) or (3) of section 165(c) or for losses described in section 165(d). (d) Coordination with other limitations This section shall be applied after the applica- tion of any other limitation on the allowance of any itemized deduction. (e) Exception for estates and trusts This section shall not apply to any estate or trust. (f) Section not to apply This section shall not apply to any taxable year beginning after December 31, 2017, and be- fore January 1, 2026. (Added Pub. L. 101–508, title XI, § 11103(a), Nov. 5, 1990, 104 Stat. 1388–406; amended Pub. L. 103–66, title XIII, §§ 13201(b)(3)(E), 13204, Aug. 10, 1993, 107 Stat. 459, 462; Pub. L. 105–277, div. J, title IV, § 4004(b)(2), Oct. 21, 1998, 112 Stat. 2681–911; Pub. L. 107–16, title I, § 103(a), June 7, 2001, 115 Stat. 44; Pub. L. 112–240, title I, § 101(b)(2)(A), Jan. 2, 2013, 126 Stat. 2316; Pub. L. 115–97, title I, §§ 11002(d)(2), 11046(a), Dec. 22, 2017, 131 Stat. 2061, 2088; Pub. L. 115–141, div. U, title IV, § 401(a)(33), Mar. 23, 2018, 132 Stat. 1186.) INFLATION ADJUSTED ITEMS FOR CERTAIN YEARS For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under section 1 of this title. Editorial Notes AMENDMENTS 2018—Subsec. (b)(2). Pub. L. 115–141 substituted ‘‘shall be’’ for ‘‘shall be shall be’’ in introductory provisions. 2017—Subsec. (b)(2)(B). Pub. L. 115–97, § 11002(d)(2), substituted ‘‘1(f)(3)(A)(ii)’’ for ‘‘1(f)(3)(B)’’ and ‘‘2016’’ for ‘‘1992’’. Subsec. (f). Pub. L. 115–97, § 11046(a), added subsec. (f). 2013—Subsec. (b). Pub. L. 112–240, § 101(b)(2)(A)(i), added subsec. (b) and struck out former subsec. (b). Prior to amendment, text read as follows: ‘‘(1) IN GENERAL.—For purposes of this section, the term ‘applicable amount’ means $100,000 ($50,000 in the case of a separate return by a married individual with- in the meaning of section 7703). ‘‘(2) INFLATION ADJUSTMENTS.—In the case of any tax- able year beginning in a calendar year after 1991, each dollar amount contained in paragraph (1) shall be in- creased by an amount equal to— ‘‘(A) such dollar amount, multiplied by ‘‘(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting ‘calendar year 1990’ for ‘calendar year 1992’ in subparagraph (B) thereof.’’ Subsecs. (f), (g). Pub. L. 112–240, § 101(b)(2)(A)(ii), struck out subsecs. (f) and (g), which related to phase- out of limitation and termination of applicability of section, respectively. 2001—Subsecs. (f), (g). Pub. L. 107—16 added subsecs. (f) and (g). 1998—Subsec. (c)(3). Pub. L. 105–277 substituted ‘‘for casualty or theft losses described in paragraph (2) or (3) of section 165(c) or for losses described in section 165(d)’’ for ‘‘for losses described in subsection (c)(3) or (d) of section 165’’. 1993—Subsec. (b)(2)(B). Pub. L. 103–66, § 13201(b)(3)(E), substituted ‘‘1992’’ for ‘‘1989’’. Subsec. (f). Pub. L. 103–66, § 13204, struck out heading and text of subsec. (f). Text read as follows: ‘‘This sec- tion shall not apply to any taxable year beginning after December 31, 1995.’’ Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2017 AMENDMENT Amendment by section 11002(d)(2) of Pub. L. 115–97 ap- plicable to taxable years beginning after Dec. 31, 2017, see section 11002(e) of Pub. L. 115–97, set out as a note under section 1 of this title. Pub. L. 115–97, title I, § 11046(b), Dec. 22, 2017, 131 Stat. 2088, provided that: ‘‘The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017.’’ EFFECTIVE DATE OF 2013 AMENDMENT Amendment by Pub. L. 112–240 applicable to taxable years beginning after Dec. 31, 2012, see section 101(b)(3) of Pub. L. 112–240, set out as a note under section 1 of this title. EFFECTIVE DATE OF 2001 AMENDMENT Pub. L. 107–16, title I, § 103(b), June 7, 2001, 115 Stat. 45, provided that: ‘‘The amendment made by this sec- Page 462 TITLE 26—INTERNAL REVENUE CODE [§ 71 1 Section catchline amended by Pub. L. 115–97 without cor- responding amendment of analysis. tion [amending this section] shall apply to taxable years beginning after December 31, 2005.’’ EFFECTIVE DATE OF 1998 AMENDMENT Pub. L. 105–277, div. J, title IV, § 4004(c)(3), Oct. 21, 1998, 112 Stat. 2681–911, provided that: ‘‘The amendment made by subsection (b)(2) [amending this section] shall apply to taxable years beginning after December 31, 1990.’’ EFFECTIVE DATE OF 1993 AMENDMENT Amendment by section 13201(b)(3)(E) of Pub. L. 103–66 applicable to taxable years beginning after Dec. 31, 1992, see section 13201(c) of Pub. L. 103–66, set out as a note under section 1 of this title. EFFECTIVE DATE Section applicable to taxable years beginning after Dec. 31, 1990, see section 11103(e) of Pub. L. 101–508, set out as an Effective Date of 1990 Amendment note under section 1 of this title. PART II—ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME Sec. [71. Repealed.] 72. Annuities; certain proceeds of endowment and life insurance contracts. 73. Services of child. 74. Prizes and awards. 75. Dealers in tax-exempt securities. [76. Repealed.] 77. Commodity credit loans. 78. Dividends received from certain foreign cor- porations by domestic corporations choos- ing foreign tax credit.1 79. Group-term life insurance purchased for em- ployees. 80. Restoration of value of certain securities. [81. Repealed.] 82. Reimbursement of moving expenses. 83. Property transferred in connection with per- formance of services. 84. Transfer of appreciated property to political organizations. 85. Unemployment compensation. 86. Social security and tier 1 railroad retirement benefits. 87. Alcohol and biodiesel fuels credits. 88. Certain amounts with respect to nuclear de- commissioning costs. [89. Repealed.] 90. Illegal Federal irrigation subsidies. 91. Certain foreign branch losses transferred to specified 10-percent owned foreign corpora- tions. Editorial Notes AMENDMENTS 2017—Pub. L. 115–97, title I, §§ 11051(b)(1)(B), 14102(d)(2), Dec. 22, 2017, 131 Stat. 2089, 2194, struck out item 71 ‘‘Alimony and separate maintenance pay- ments’’ and added item 91. 2004—Pub. L. 108–357, title III, § 302(c)(1)(B), Oct. 22, 2004, 118 Stat. 1465, substituted ‘‘and biodiesel fuels credits’’ for ‘‘fuel credit’’ in item 87. 1989—Pub. L. 101–239, title VII, § 7822(c), Dec. 19, 1989, 103 Stat. 2425, substituted ‘‘Illegal Federal irrigation’’ for ‘‘Federal irrigation’’ in item 90. Pub. L. 101–140, title II, § 202(b), Nov. 8, 1989, 103 Stat. 830, struck out item 89 ‘‘Benefits provided under certain employee benefit plans’’. 1987—Pub. L. 100–203, title X, §§ 10201(b)(6), 10611(b), Dec. 22, 1987, 101 Stat. 1330–387, 1330–452, struck out item 81 ‘‘Increase in vacation pay suspense account’’ and added item 90. 1986—Pub. L. 99–514, title VIII, § 805(c)(1)(B), title XI, § 1151(j)(1), Oct. 22, 1986, 100 Stat. 2362, 2508, substituted ‘‘Increase in vacation pay suspense account’’ for ‘‘Cer- tain increases in suspense accounts’’ in item 81, and added item 89. 1984—Pub. L. 98–369, div. A, title I, § 91(f)(2), July 18, 1984, 98 Stat. 608, added item 88. 1983—Pub. L. 98–21, title I, § 121(f)(3), Apr. 20, 1983, 97 Stat. 84, added item 86 and redesignated former item 86 as 87. 1980—Pub. L. 96–223, title II, § 232(c)(3), Apr. 2, 1980, 94 Stat. 277, added item 86. 1978—Pub. L. 95–600, title I, § 112(c)(1), Nov. 6, 1978, 92 Stat. 2778, added item 85. 1976—Pub. L. 94–455, title XIX, § 1901(b)(5), Oct. 4, 1976, 90 Stat. 1793, struck out item 76 ‘‘Mortgages made or obligations issued by joint-stock land banks’’. 1975—Pub. L. 93–625, §§ 4(c)(2), 13(a)(2), Jan. 3, 1975, 88 Stat. 2111, 2121, substituted ‘‘Certain increases in sus- pense accounts’’ for ‘‘Increases in suspense account under section 166(g)’’ in item 81, and added item 84. 1969—Pub. L. 91–172, title II, § 231(c)(1), title III, § 321(c), Dec. 30, 1969, 83 Stat. 579, 591, added items 82, 83. 1966—Pub. L. 89–722, § 1(b)(2), Nov. 2, 1966, 80 Stat. 1152, added item 81. Pub. L. 89–384, § 1(b)(2), Apr. 8, 1966, 80 Stat. 102, added item 80. 1964—Pub. L. 88–272, title II, § 204(a)(2), Feb. 26, 1964, 78 Stat. 36, added item 79. 1962—Pub. L. 87–834, § 9(d)(1), Oct. 16, 1962, 76 Stat. 1001, added item 78. [§ 71. Repealed. Pub. L. 115–97, title I, § 11051(b)(1)(B), Dec. 22, 2017, 131 Stat. 2089] Section, Aug. 16, 1954, ch. 736, 68A Stat. 19; Pub. L. 98–369, div. A, title IV, § 422(a), July 18, 1984, 98 Stat. 795; Pub. L. 99–514, title XVIII, § 1843(a)–(c)(1), (d), Oct. 22, 1986, 100 Stat. 2853, 2855, related to inclusion in gross in- come of amounts received as alimony or separate main- tenance payments. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal applicable to any divorce or separation instru- ment (as defined in former subsec. (b)(2) of this section as in effect before Dec. 22, 2017) executed after Dec. 31, 2018, and to such instruments executed on or before Dec. 31, 2018, and modified after Dec. 31, 2018, if the modification expressly provides that the amendment made by section 11051 of Pub. L. 115–97 applies to such modification, see section 11051(c) of Pub. L. 115–97, set out as an Effective Date of 2017 Amendment note under section 61 of this title. § 72. Annuities; certain proceeds of endowment and life insurance contracts (a) General rules for annuities (1) Income inclusion Except as otherwise provided in this chap- ter, gross income includes any amount re- ceived as an annuity (whether for a period cer- tain or during one or more lives) under an an- nuity, endowment, or life insurance contract. (2) Partial annuitization If any amount is received as an annuity for a period of 10 years or more or during one or more lives under any portion of an annuity, endowment, or life insurance contract— (A) such portion shall be treated as a sepa- rate contract for purposes of this section, (B) for purposes of applying subsections (b), (c), and (e), the investment in the con-