What are the phaseouts of itemized deductions and personal exemptions?

High-income taxpayers lose some of their itemized deductions and personal exemptions when their incomes exceed specified thresholds. The 2001 tax act limits the reductions to 2/3 in 2006 and 2007 and to 1/3 in 2008 and 2009. The reductions disappear entirely in 2010 but reappear in full with the sunset of the 2001 tax act in 2011.

History: Congress enacted PEP and Pease in 1990 to raise revenue and made the reductions permanent in 1993. More detail on history.

Revenue Raised: Together Pease and PEP will raise revenues totaling about $8 billion in 2007. In 2008, because they drop from 2/3 to 1/3 of the full reductions, the revenue gain will fall by roughly half to about $4 billion.