What is a Tax benefit phase-out?
A tax benefit phase-out is a gradual reduction in the value of tax deductions, credits, or other benefits as a taxpayer's income exceeds specified thresholds. Under the One Big Beautiful Bill Act, overtime deductions phase out for individuals with modified adjusted gross income above $150,000 or joint filers above $300,000, reducing benefits by $100 for every $1,000 over the threshold. Strategic taxpayers can manage phase-outs through maximizing Traditional 401k and Health savings account contributions that lower MAGI and preserve eligibility for valuable tax benefits.
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