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Comprehensive Guide to IRS Income Phase Outs Rules

As you may well know, your modified adjusted gross income (MAGI) will determine what sort of tax benefits you’ll be eligible for. What you may not know, is how your MAGI will determine those benefits and what benefits fall under the phase out rules. You probably don’t know that because it’s not all written down in one place… until now. The majority of these fall into one of two categories, education-related or retirement-related, and it’s a great example of how you can change behavior through tax laws. The government wants to help you prepare for the future and stop being stupid.

First off, the IRS defines adjusted gross income as your gross income minus adjustments, which happen to all be deductions but do not include the standard or itemized deductions. Some of these adjustments are the IRA deduction, student loan interest deduction, tuition and fee deduction, moving expenses, etc. The modified adjusted gross income is your AGI plus some of the stuff that you deducted put back. For more information, please refer to IRS.gov [3] on both topics.

(All figures have been updated for 2008 unless otherwise specified)

Child Tax Credit

Itemized Deductions

Personal and Dependency Exemptions

Interest on Student Loans

HOPE Scholarship & Lifetime Learning Education Credits

Coverdell Education Savings Accounts (Education IRA)

Education Savings Bonds

Individual Retirement Accounts

Roth IRA
I, and many other bloggers, have covered the Roth IRA phase-outs probably a million times because the Roth is such a popular retirement vehicle. If you want to see the phase-out information then read over this 2008 Roth IRA Phase-out [16] article.

What do you think? Did I miss anything or screw anything up?