Case Study - Phaseout of Exemptions
Lincoln and Shabona Park are married and have one child, Grant.
The Parks file a joint return and have a joint adjusted gross income
of $364,700. They claim three exemptions. The reduction of the Parks'
exemptions for 2014 will be calculated as follows:
| Adjusted gross income |
$ 364,700 |
| Less: threshold for joint filers |
- 305,050 |
| Amount exceeding threshold |
$ 59,650 |
The $59,650 figure is divided by $2,500 to reach
the result of 23.86. Rounding up 23.86 to the nearest whole number
gives us 24. 24 x 2% = 48%. Therefore the Parks will lose 48% of
their exemptions. Because the Parks would have an unreduced
exemption amount of 3 x $3,950, or $11,850, for 2014, and 48% x $11,850
= $5,688, the Parks may claim exemptions of only $6,162 ($11,850 -
$5,688). |
