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Tax Break Phaseouts by Modified Adjusted Gross Income

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The title is scary but this article should be pretty useful for those of you trying to find out the modified adjusted gross income phase-out schedules of various popular tax breaks for the 2006 tax year. I’ve tried to keep this list as accurate as I can but with all tax decisions you should refer to a professional for the final say. The IRS changes the rules all of the time and sometimes, when I’m trying to decipher these publications and forms, I still get them wrong.

Why do these schedules matter? They matter because sometimes by donating a little extra money to your favorite charity, you drop your AGI down far enough to become eligible for a credit you otherwise wouldn’t have been. There are many ways to decrease your AGI and many of them are a benefit to you otherwise (such as contributing more to your 401k), so this should serve as a rough guide to some financial decisions that may bear fruit down the road come April 15th next year.

Roth IRA

Phase out begins at $150,000 for married filing jointly or qualifying widow(er), $0 for married filing separately and you lived with your spouse at any time during the year, and $95,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year. The top of the phase-out (where you can contribute $0 to your Roth IRA) is $160,000 for married filing jointly/qualifying widow(er), $10,000 for married filing separately, and $110,000 for single, head of household, or married filing separately. [specific schedule details]

Traditional IRA Deductions

Your adjusted gross income won’t prevent you from contributing to your Traditional IRA but it will affect your ability to deduct those contributions (whether or not your company offers an employer sponsored retirement plan also affects this). The phase out for single tax payers begins at $50,000 and is entirely phased out by $60,000; the phase out period for married filing jointly is from $75,000 to $85,000. [more information]

Hope Scholarship Credit/Lifetime Learning Credit

Phase out begins at $43,000 for single, head of household, or married filing separately and ends at $53,000. The phase out begins at $87,000 for joint returns and ends at $107,000. This limit is inflation adjusted each year. [specific schedule details: Hope, Lifetime Learning]

Child Credit

The phase out begins $55,000 for married filing separately, $75,000 for single, head of household, or qualifying widow(er), and $110,000 for married filing jointly. [specific schedule details]

Earned Income Tax Credit

The phase out ends at $35,263 if single, head of household with more than one qualifying child ($37,750 if married filing jointly), ends at $31,030 if single, head of household with one qualifying child ($33,030 if married filing jointly), and ends at $11,750 if single, head of household without a qualifying child ($13,750 if married filing jointly). [specific schedule details]

Filing A Return

This applies for GROSS INCOME, you may not have to file an income return if:
You are single, under 65, and earned less than $8,200;
You are single, over 65, and earned less than $9,450;
You are married filing jointly, under 65 (both), and earned less than $16,400;
You are married filing jointly, 65 or older (one), and earned less than $17,400;
You are married filing jointly, over 65 (both), and earned less than $18,400;
You are married filing separate, and earned less than $3,200;
You are head of household, under 65, and earned less than $10,500;
You are head of household, over 65, and earned less than $11,750;
You are qualifying widow(er) with dependent child, under 65, and earned less than $13,200;
You are qualifying widow(er) with dependent child, over 65, and earned less than $13,200;
[double check the rules]

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One Response to “Tax Break Phaseouts by Modified Adjusted Gross Income”

  1. frugal says:

    You can get most of those things & phaseouts calculated automatically using my federal income tax calculator for 2006. It’s probably a lot easier than reading through pages of tax instructions.


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