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View Diary: Do YOU understand how tax brackets work??? (124 comments)

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  •  Phase outs are designed to avoid tax shock (0+ / 0-)

    The basic concept of a phase out is that an available deduction (or tax credit) is slowly reduced as income increases. Think of it as two thresholds. Those under the lower threshold get the full deduction/credit. Those above the upper threshold get no deduction/credit.

    Those between the two thresholds see the deduction/credit slowly phased out. The idea is that a small increase in income would not dramatically reduce/eliminate the deduction/credit.

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