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 $249,100. They claim three exemptions. The reduction of the Parks' exemptions for 2007 will be calculated as follows:
| Adjusted gross income |
$ 249,100 |
| Less: threshold for joint filers |
- 234,600 |
| Amount exceeding threshold |
$ 14,500 |
The $14,500 figure is divided by $2,500 to reach the result of 5.8. Rounding up 5.8 to the nearest whole number gives us 6. 6 x 2% = 12%, which is the percentage of their exemptions that the Parks will lose.
Because the Parks would have an unreduced exemption amount of 3 x $3,400 =
$10,200 for 2007, and 12% x $10,200 = $1,224, the Parks may claim exemptions of only $8,976 ($10,200 - $1,224).
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