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Phaseouts For Tax Benefits
By JLP | January 10, 2007
My friend and frequent commenter, Stacey, has mentioned this before and I’m finally getting around to writing about it.
When figuring our taxes, most of us take advantage of various deductions and credits, which help reduce our tax bill. That said, one thing that can totally screw it all up are the various income phaseouts that reduce or eliminate the deduction or credit. It makes tax planning very difficult.
Anyway, today’s Wall Street Journal published a an interesting article along with a helpful little chart that explains the various provisions and how they are affected by the phaseout. I took the chart and made it into the following table:
|
Provision |
What it is |
Phaseout |
|
Personal Exemptions |
Exemptions for yourself, |
Phaseout begins at $234,600 and tops |
|
Itemized Deductions |
Deductions for such items as state |
Limit begins on certain deductions once income |
|
Child Tax Credit |
Tax credit for qualifying children. |
Credit is reduced for income above $110,000.2 |
|
Deduction of |
Interest on student loans may |
Phaseout begins at $110,000 and tops out at |
|
Mortgage-Insurance Deduction |
New benefit this year for many |
Phaseout begins once income exceeds $100,000 |
Many experts are calling for the phaseouts to be eliminated. However, don’t count on this anytime soon since eliminating the phaseout would mean that the IRS would lose out on billions of dollars of revenue each year.
All of this is just another reason why we need to scrap our tax code and come up with something that is simple, transparent, and fair!
Topics: Tax Planning, Taxes |