The President and some leading Members of Congress have indicated that income tax reform is a major policy objective. The House Budget Resolution ( H.Con.Res. 25 ) supports a revenue-neutral reform that would broaden the individual income tax base and lower statutory income tax rates, while the Senate Budget Resolution ( S.Con.Res. 8 ) proposes revenue raising through base-broadening. The President has proposed substantive tax policy changes in his budget outlines. Further, both tax-writing committees have held hearings and have working groups on tax reform. Most tax provisions that might be considered for base-broadening are contained in a list of tax expenditures. Itemized deductions are a group of tax expenditures likely to be considered as important candidates for reform. The major itemized deductions are for mortgage interest, state and local taxes, charitable contributions, and medical costs. The Ways and Means Committee has recently held hearings on provisions affecting state and local governments, charitable contributions, and housing tax provisions (including the home mortgage interest deduction). Itemized deductions account for about one-fifth of all tax expenditures, and may be easy targets of reform, based on their visibility and some policy grounds. In particular, itemized deductions are already listed on the 1040 income tax form and are easily measured. Eliminating some of them might contribute to tax simplification (unlike revisions such as including employee fringe benefits in income). At the same time, itemized deductions have broad support, and are claimed by roughly one-third of tax filers. Arguments can be made to justify some of these deductions and some of them are among the longest-standing provisions of the federal income tax code (see Appendix A for a brief history of itemized deductions). Reducing incentives and subsidies that alter taxpayers' choices is one potential objective of tax reform. In addition, as suggested by the differing budget resolutions, some proponents of reform see broadening the tax base as a means of raising revenue without raising tax rates, while others see it as a way to pay for reduced tax rates. For a given revenue target, tax reform can involve a trade-off between a broader base and lower rates. In addition, as outlined in this report, base-broadening could have unintended side effects, such as effects on savings incentives or the labor supply. A variety of proposals for limiting itemized deductions, either as an overall proposition or through specific revisions to certain deductions, have been advanced by policy makers, economists, and tax experts. This report discusses the proposals that have been advanced, their potential revenue gain, their consequences for taxpayer behavior and economic efficiency, their distributional implications, and administrative and transition issues that may arise. Although this report provides some background material, it assumes some familiarity with itemized tax deductions, and the debate surrounding their reform. For an introduction to tax deductions, see CRS Report R42872, Tax Deductions for Individuals: A Summary , by [author name scrubbed]. For general tax data analysis on itemized tax deductions, see CRS Report R43012, Itemized Tax Deductions for Individuals: Data Analysis , by [author name scrubbed]. Individual income tax filers have the option to claim either a standard deduction or the sum of their itemized deductions on the federal income tax Form 1040. The standard deduction is a fixed amount, based on filing status, available to all taxpayers. Alternatively, tax filers may claim itemized deductions . Taxpayers that itemize must list each item separately on their tax return. Whichever deduction a tax filer claims—standard or itemized—the deduction amount is subtracted from adjusted gross income (AGI) in the process of determining taxable income. AGI is the basic measure of income under the federal income tax and is the income measurement before itemized or standard deductions and personal exemptions are taken into account. Generally, only individuals with aggregate itemized deductions greater than the standard deduction find it worthwhile to itemize. The tax benefit of choosing to itemize is the amount that their itemized deductions exceed the standard deduction, multiplied by their top marginal income tax rate. About one-third of taxpayers, largely in the middle and upper income parts of the income distribution, itemize deductions. At incomes of more than $200,000, 95% or more of taxpayers itemized, although two-thirds of itemizers had incomes below $100,000. Therefore while the benefits of itemizing are more concentrated in higher incomes, many middle-class taxpayers itemize deductions. Itemized deductions are often grouped together in broader discussions of tax policy, in part because they are grouped together on the tax Form 1040. But, itemized deductions exist for a variety of reasons, can affect different types of economic behavior, and are designed in ways such that they target (or exclude) different types of tax filers. One way to distinguish between different types of itemized deductions is whether they are classified as tax expenditures. Tax expenditures are defined under the Congressional Budget and Impoundment Control Act of 1974 ( P.L. 93-344 ) as "revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability." The Joint Committee on Taxation (JCT) also provides annual revenue loss estimates for tax expenditures. In contrast, some itemized deductions are not classified as tax expenditures because they generally are appropriate to use to measure income (such as employee job expenses). These provisions might be contained in the form of an itemized deduction for reasons of simplifying tax compliance and administration, so that taxpayers do not keep track of and deduct small amounts, or so most taxpayers will not have to encounter provisions that apply to limited numbers of taxpayers on other, simpler, tax forms. Detailed tables showing the number of claimants and the size of deductions for each type of itemized deduction are shown in Appendix A . Four basic itemized deductions, summing to $1.1 trillion of deductions in 2010, constitute those classified as tax expenditures: State and local deductions for income, sales, and property taxes totaled $442 billion in 2010. Tax deductions for state income taxes were the largest at $246 billion, followed by real estate property taxes at $172 billion. Optional sales tax deductions (which are part of the temporary provisions termed "extenders" and, absent legislation, will expire after 2013) were $16 billion. Tax deductions for state and local personal property taxes (on motor vehicles) were $7 billion. Mortgage interest deductions totaled $401 billion in 2010. Less than $2 billion of that amount was for home equity loan points, and less than $7 billion for qualified mortgage insurance premiums. The latter is also an "extender." Charitable contribution deductions totaled $172 billion in 2010. Of these deductible contributions, $135 billion was in cash, $44 billion in property, and $31 billion carried over from prior years (due to limits on deductions as a percentage of income). Medical and dental expense deductions above the 7.5% floor totaled $85 billion in 2010. These deductions have diverse purposes. Notably, for example, the deduction of extraordinary medical expenses is not an incentive to encourage spending but a provision to reflect ability to pay taxes. State and local income taxes are not under the control of the taxpayer in the short run (and cannot be avoided other than relocating), but the deduction may encourage state and local governments to enact these taxes. Benefits for homeownership and charitable contributions, however, arise from explicit choices of the taxpayer and are incentives to make the choice to own a home or donate to charity. Itemized deductions not classified as tax expenditures were $264 billion, although only $117 billion were allowed because many of these deductions are subject, as a group, to a floor and only amounts in excess of 2% of income are deducted. Examples of these itemized deductions (some limited and some not) are investment interest expenses, unreimbursed employee expenses, tax preparation expenses, other costs of earning income, such as investment expenses, and gambling losses. These deductions would likely need to be deducted elsewhere on the tax Form 1040 if itemized deductions were repealed. Numerous restrictions are on itemized deductions in the form of floors or ceilings, which may be in dollar amounts or percentage-of-income amounts. A floor means that only deductions in excess of a certain amount are allowed. A ceiling means that only deductions up to a certain amount are allowed. There is also a so called "limitation" on the amount of itemized deductions that certain higher-income tax filers are subject to. Pease applies to tax filers with an AGI over $250,000 ($275,000 for head of household filers and $300,000 for married joint filers). Pease is, however, not a true limit on deductions, but rather an increased tax rate. Two itemized deductions are subject to caps or ceilings. Mortgage interest deductions are allowed for interest on the first $1 million of a mortgage. In addition, while interest on home equity loans can be deducted, only interest associated with up to $100,000 of loans is deductible. Whereas the mortgage interest deduction is subject to a dollar ceiling, charitable contributions are subject to percentage-of-income ceilings, although those ceilings are so high that few taxpayers encounter them. Cash contributions are limited to 50% of income and to 30% of income for contributions to certain types of nonprofits, mainly foundations. These limits are lower for charitable contributions of appreciated property: 30% and 20%. In effect, the limits prevent individuals from wiping out too much of their tax liability via charitable deductions. Any unused deductions can also be carried over and deducted in future years.