TAP 03-007

Table Addressing Phase outs

Statement of Issue:

Over many years, various administrative and legislative changes that were designed to be income tax incentives were implemented. They included: tax credits for children, for being married and filing jointly, for student loan interest, IRA contributions, etc. The disparity of the phase outs at various income levels and the differing eligibility requirements are confusing to taxpayers. Many of the tax credits and incentives do not escalate with inflation.

Proposal:

Publish a table showing the various tax credits and deductions addressing both eligibility requirements and the income phase ins and outs in the 1040 series instruction booklets. The table would provide a good visual aid for taxpayers to compare the various credits and deductions.

Response Notes:

This suggestion was to add a table to the Form 1040 series instruction booklets that would address the various credits and deductions along with their respective eligibility requirements. We are not adopting this suggestion for the following reasons.

Each deduction or credit has its own specific set of rules of eligibility. For example, some deductions (such as the student loan interest deduction) and credits phase out using modified adjusted gross income. Others (such as the child tax credit) phase out using adjusted gross income. A further complication is that the definition of modified adjusted gross income can also vary among the different deductions and credits. We would have to keep the table to a manageable size and it would only provide taxpayers with a limited amount of information. We prefer to direct taxpayers to the specific sets of instructions for each deduction and credit. Taxpayers can see all the rules that apply and it lessens the possibility of error.