Phase-out of Personal Exemptions

Phase-out of Personal Exemptions means:
the reduction in personal exemptions as income rises. Taxpayers whose Adjusted Gross Incomes (AGIs) exceed a prescribed threshold must reduce or eliminate the deductions for personal exemptions to which they would otherwise be entitled. For 1993, the thresholds were $162,700 for married individuals filing joint returns, $135,600 for heads of households, $108,450 for unmarried individuals, and $81,350 for married individuals filing separate returns. For subsequent years, these threshold amounts will be indexed for inflation.

A taxpayer generally must reduce the deduction for exemptions by 2% of the otherwise allowable amount for each $2,500 increment (or portion thereof) by which his or her AGI exceeds the applicable threshold. For married taxpayers filing separate returns, however, the applicable increment is $1,250 instead of $2,500. Former IRC (check if this IRC provision is current here) §151(d)(3).

See Tax exemption and Tax exemption.