Personal Exemption Phaseout

Yesterday, I wrote a post about how your itemized deductions would be reduced if you had income greater than a certain amount.  But itemized deductions are not the only items that are reduced when you meet certain income levels.  Your personal exemptions are also reduced by a certain amount when you reach a certain income level.

As part of the same legislation that gave us the itemized deduction reduction, the Personal Exemption Phaseout (PEP) , the personal exemption will be reduced by two percent for every $2,500 that your adjusted gross income is greater than the threshold for a given filing status.

For 2013, the phaseout of the personal exemption of $3,900 (for 2013) will be over the following income ranges:

Filing Status

Phaseout Starting Point

Phaseout End Point




Head of Household



Married Filing Jointly or Qualifying Widow(er)



Married Filing Separately




So, how does this work?  Let’s take a look at an example with a married couple with three children, who have adjusted gross income of $300,000.  In this example, the personal exemptions would total $19,500.  However, because their income is $50,000 over the phaseout start point, the exemptions would need to be reduced.  $50,000 divided by the aforementioned $2,500 is 20.  Therefore, the exemptions need to be reduced by 40% or $7,800 ($19,500 in total deductions times 40%).  The amount of personal exemptions that the family can claim will be $11,700.

Have you ever run into a situation where your personal exemptions deductions were reduced on your tax return due to income limits?    I’d love to hear about it.  Also, if you have any questions, shoot them to me at, and I would be happy to answer them.  If you need help with other tax questions, or with preparing a return, drop me a line, and we can discuss your situation.

In accordance with Circular 230 Treasury Department Regulations, I am required to advise you that any tax advice contained in this article may not be relied upon to avoid penalties under the Internal Revenue Code.  If you are interested in a written opinion that can be relied upon to prevent the imposition of tax-related penalties, please contact the author.

3 thoughts on “Personal Exemption Phaseout

  1. minecraft games

    I’m impressed, I must say. Rarely do I come across a blog that’s both equally educative and entertaining, and without a doubt,
    you’ve hit the nail on the head. The issue is something which not
    enough people are speaking intelligently about.

    I’m very happy I found this in my search for something concerning this.

  2. jak schudnąć skutecznie

    Simply wish to say your article is as astounding. The clearness in your post
    is simply great and i can assume you’re an expert on this subject.
    Fine with your permission let me to grab your RSS feed to
    keep up to date with forthcoming post. Thanks a million and please carry on the
    gratifying work.


Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>