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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).


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