What is the exemption phaseout?
For people who have high adjusted gross incomes, the tax laws provide for a phaseout of the exemption they can claim. For each filing status (single, married filing jointly, etc.), there are two relevant phaseout numbers. For 2006, the amount of your personal exemption begins to decrease if your adjusted gross income is over the following amount:
If you are filing single – at $150,500.
If you are married filing separately – at $112,875.
If you are married filing jointly – at $225,750.
If you are the head of household – at $188,150.
If you are a qualifying widow(er) – at $225,750.
If your income is over the above-listed amount, you can use a worksheet included with Form 1040 (the “Deduction for Exemptions Worksheet”) to calculate the exact amount you are entitled to claim for personal exemptions. However, if your adjusted gross income is above the following amounts, your personal exemption will simply be $1,100, no matter how much over the amount it is:
If you are filing single – at $273,000
If you are married filing separately – at $174,125
If you are married filing jointly – at $348,250.
If you are the head of household – at $310,650.
If you are a qualifying widow(er) – at $348,250.
It is worth noting that unless Congress changes the law regarding these phaseouts, they are going to be gradually eliminated between now and 2010. Each year, the amount of the phaseout will be less, and from 2010 on, there will be no phaseout at all.