What is a personal exemption phaseout? How does it work? Can you explain it to me in a way I can understand it?

Personal Exemption Phaseout (PEP)
TaxConnections Members... Answer This Question Want To be One of Our Tax Experts? Register Here

Tax Professional Answers

User Photo
Kathryn Morgan
The PEP reduces the total dollar amount of exemptions available by 2 percent for every $2,500 (or portion thereof) that a taxpayer's AGI exceeds the threshold for their filing status. 

The 2013 phaseout thresholds are:

  • $250,000 for single taxpayers
  • $300,000 for married filing jointly and surviving spouses
  • $275,000 for head of household
  • $150,000 for married filing separately

The phaseout thresholds are indexed for inflation for tax years beginning after 2013. The PEP was suspended during tax years 2010, 2011 and 2012.

Example: Jon, a single taxpayer, has AGI of $275,500 in 2013. The 2013 phaseout for personal exemptions began at $250,000 for single taxpayers. Without any phaseout, the personal exemption in 2013 is $3,900.

Excess of AGI over phaseout threshold: $25,500 ($275,500 - $250,000)
Divide result by $2,500 and round up to the next whole number: $25,500 / $2,500 = 10.2, rounded up to 11
Multiply result by 2% = 22% (11 x 2%) 
Exemption phaseout of 22% = $858 ($3,900 × 22%)
Jon's personal exemption in 2013: $3,042 ($3,900 - $858)

If you use the formula above and plug in your number it will work out every time.  Or if you would care to provide some number I would be happy to do the calculation for you.

Leave a Comment 232 weeks ago

Meet Leading Tax Advisors

User Photo Peter J. Scalise

Federal Tax Credits & Incentives Practice Leader

New York, NY

User Photo John L Stancil

Tax Advisor/CEO

Lakeland, FL

User Photo John R Dundon, II EA

Tax Director

Denver, CO

User Photo Kevin Johnson MS, JD, LL.M, CPA


Philadelphia, PA

User Photo Brian Weaver, CPA, MBA

Managing Tax Consultant

Des Plaines, IL

User Photo William Rogers, CFP, MBA, EA

Rancho Santa Fe, CA


User Photo Clinton J Donnelly, LLM

International Tax Advisor

Panama City, Panama

User Photo Jim Marshall, EA

President/ Tax And Financial Advisor

Scottsdale, AZ

User Photo Brett A Thompson, JD, CPA

Managing Tax Lawyer

Katy, TX

User Photo Charles Woodson, EA

Tax Advisor/Fiduciary Coach

San Diego, CA

User Photo John Richardson

Tax Lawyer

Toronto, Canada

User Photo Clifford Benjamin

Senior Tax Principal

Daytona Beach, FL

User Photo Kazim Qasim, EA, CTC

Managing Tax Advisor/CEO

Orlando, FL


View/Select our Current List of Tax Topics

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Previous PageNext Page



Learn from tax advisors, straight to your inbox

Update My Email Address
Contact Us Today