Phase-out for high-income taxpayers

The credit allowable for 2008 is phased out for taxpayers with adjusted gross income (AGI) over $174,730 and is eliminated when AGI reaches $214,730.

(For 2007, the phase-out began at $170,820 and was complete at $210,820.) The 2008 credit is reduced by a percentage equal to the excess of AGI over $174,730 divided by $40,000. For example, say taxpayers who could otherwise claim a $2,000 credit have an AGI of $184,730 in 2008. Their $184,730 AGI minus $174,730 equals $10,000, and $10,000 divided by $40,000 is 25%. Accordingly, the taxpayers "lose" 25% of their credit ($2,000 times 25% is $500) and can only claim a credit of $1,500. (Special rules for determining AGI apply in some cases.) The phase-out rules for high-AGI taxpayers apply for the exclusion as well.

 

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