Phaseout of Exemptions for High-Income Families
Taxpayers in the higher brackets will find that, even if they
are entitled to one or more exemptions for dependents, they may not
get the full benefit of the exemptions on their tax return. In 2014,
your dependency exemptions may be phased out if your adjusted gross
income exceeds the applicable threshold. The threshold amounts
of adjusted gross income (AGI) at which you must begin to reduce your
personal exemptions are adjusted each year for inflation. The amounts
shown in the chart below apply for 2014.
| Filing Status |
Phaseout Begins At: |
Phaseout Complete Above: |
| Married filing separately |
$152,525 |
$213,775 |
| Single |
254,200 |
376,700 |
| Head of household |
279,650 |
402,150 |
| Married filing jointly or qualifying widow(er) |
305,050 |
427,550 |
If your income exceeds the amount at which the phaseout
begins for your filing status, you have to determine the amount of
the excess income, and divide it by $2,500 ($1,250 if married filing
separately). Take this result and round it up to the nearest whole
number. Then multiply this whole number by two percent. Your answer
is the percentage by which you must reduce your otherwise allowable
exemptions. The exemption can be reduced by up to 100 percent. IRS
Publication 501, Exemptions, Standard Deduction, and Filing Information provides
a worksheet that can be used for this calculation.
- For an example of how this works, see our case
sudy.
- If the exemption affects you, consider minimizing the problem
with some careful planning.
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