The cap shrinks by 30 cents for each dollar of income above a threshold
What the document says“the applicable limitation amount shall be reduced by 30 percent of the excess (if any) of the taxpayer's modified adjusted gross income over the threshold amount (half the threshold amount in the case of a married individual filing a separate return).”
The section reduces the applicable limitation amount, for a taxable year beginning before January 1, 2030, by 30 percent of the taxpayer's modified adjusted gross income above the threshold amount, or half that threshold for a married individual filing separately. The threshold is $500,000 for a year beginning in 2025, $505,000 for one beginning in 2026, and 101 percent of the previous year's figure for a year beginning after 2026. Modified adjusted gross income means adjusted gross income increased by any amount excluded under section 911, 931 or 933.
What the document actually says“the applicable limitation amount shall be reduced by 30 percent of the excess (if any) of the taxpayer's modified adjusted gross income over the threshold amount (half the threshold amount in the case of a married individual filing a separate return).”
The cap shrinks as income rises. It drops by 30 cents for each dollar above a set line. A married person filing alone gets half that line.
The line is $500,000 for a tax year in 2025. It is $505,000 for 2026. After that it grows by 1 percent a year.
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