The American Taxpayer Relief Act of 2012 included a provision to phase out, beginning in 2013, both personal exemptions and itemized deductions for higher-income taxpayers. The phase-out will begin when a taxpayer’s adjusted gross income (AGI) reaches a phase-out threshold amount.
The exemption phase-out starts once AGI exceeds $250,000 (single) and $300,000 (married filing jointly). If your AGI falls below these thresholds, this provision has no effect on your taxes. The personal-exemption amount is $3,900 for the 2013 tax year. The phase-out of the personal exemption (sometimes called “PEP”) means for every $2,500 of AGI (or portion of) over these thresholds, personal exemptions are reduced by 2-percent. For single filers, personal exemptions will be fully phased out once their AGI exceeds $372,501; for married couples, once AGI exceeds $422,501.
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