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Is it wrong to transition a circuit to thinner wire somewhere along its path even if the breaker is correct for the thinner wire? Specifically, if I have a circuit that currently is 20A and all #12 wire, and I tee off it in a junction box with some #14 wire and replace the breaker with a 15A one, is that ok?

Not part of the question, but to answer "why":

I have an old house, with one 15A breaker feeding lights and outlets in several bedrooms. That circuit is observed to run pretty close to 15A some of the time. I have another circuit, that I installed, a 20A breaker feeding just one outlet in one bedroom and used for just a TV and a phone charger. Never even hits 1A. I cabled it that way because I needed an outlet in that location and it happened to be very easy to do that way. Now, years later, I'm renovating an adjacent room, going back to studs and I have the opportunity to split the big upstairs circuit into two halves from a junction box there. So I figure I can keep one half on its existing 15A breaker, and connect the other half to where my new outlet is, if I replace the 20A breaker with a 15A one. Just uncomfortable with the idea of a #12 cable exiting the panel and transitioning to #14 in the walls.

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Technically, it’s perfectly legal. The requirement is for the breaker to protect the smallest wire in the circuit - not to max out the largest wire in the circuit. It’s the exact same thing that happens when you upsize a long run to deal with voltage drop.

Practically speaking, it may not be the best idea. Someone may come around again in the future, see the #12 wire in the panel, and assume it’s OK to switch back to a 20A breaker if they don’t trace every piece of wire in the circuit and find the #14.

If you do this (instead of just running #12) consider tagging the cable that exits the panel with a “circuit contains #14” label.

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    "Someone may come around again" Someone can always mess up anything. Technically the breaker and wire will have to be traced entirely if the breaker or wire are replaced. That's an electrician's job, or a homeowner with permit. Or a DIY who knows what they are doing.
    – P2000
    Commented Jan 9, 2022 at 20:20
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    @P2000 that's not an excuse to make life harder or mistakes easier.
    – Mołot
    Commented Jan 9, 2022 at 20:45
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    Tagging is a good idea.
    – jay613
    Commented Jan 9, 2022 at 21:07
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    @Mołot I'm not following what you say. This answer is good. And proper electrician's don't generally future proof everything or make assumptions about wiring and breakers. OP should not be afraid to do it to code and then also not worry about how someone later might screw up because they lack the diligence to trace wires or read labels etc...
    – P2000
    Commented Jan 9, 2022 at 21:31

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