Phased out

Some tax code preferences phase out for high-income taxpayers in the final submission for the tax year, which means, the value of such code declines when the income reaches a certain level.  

It lowers tax benefits at different rates, but it depends on their structure and range. The term may not apply to low-income and middle-income households but the benefits not only claw back from the most affluent, but it also increases the effective marginal tax rate the taxpayer faces, which decreases tax gains.

One can check online platforms to get the latest or current calculator to know the exact impact. Some taxpayers are affected by multiple tax provisions phasing out, which complicates the code.  

The term is structured in a manner that it can reduce credits, while other deductions that depend on dollar impact on the marginal tax rate can lead to a loss in deductions with an increase in the tax rate. 

Some phase-outs have pronounced cliffs and the benefits drop with large increments, in the case where the income exceeds the threshold.

Many phase-outs are indexed for inflation and they may remain fixed in real terms. If not adjusted for inflation, it can affect taxpayers over time and once inflation increases the nominal level, the taxpayers come out of the phase-out thresholds.