A phaseout range is the band of income between the point at which a tax benefit starts to shrink and the point at which it is gone. The IRS describes the mechanic in exactly those terms for the IRA deduction, saying the deduction begins to decrease, or phase out, when income rises above a certain amount and is eliminated altogether when it reaches a higher amount (IRS, Publication 590-A (2025)).
The band is real on a return and it is usually not written anywhere in the statute. What the Code writes is a reduction formula, and the range is what falls out of it.
The Code Prints a Formula, Not a Band
There are three formula shapes in common use, and they differ in whether the width of the band is stated or has to be worked out. Knowing which shape a benefit uses is the difference between reading a range off the page and computing one.
The Ratio Shape, Where the Width Is Printed
The IRA deduction limitation is the clearest case. The reduction bears the same ratio to the dollar limitation as the excess of adjusted gross income over the applicable dollar amount bears to $10,000, or $20,000 in the case of a joint return (26 U.S.C. 219(g)(2)(A)).
That denominator is the width of the range. Income equal to the applicable dollar amount produces no reduction, income $10,000 above it produces a reduction equal to the whole limitation, and everything between is proportional.
The starting points of that band are indexed and the width is not. The inflation provision increases each of the dollar amounts in paragraphs (3)(B)(i), (3)(B)(ii) and (7)(A) by a cost-of-living adjustment, rounded to the nearest multiple of $1,000 (26 U.S.C. 219(g)(8)). Every entry on that list is an applicable dollar amount, which is where a band opens. The two figures that set how wide a band runs, the one in paragraph (2)(A)(ii) and the one in paragraph (7)(B), are on neither. So these bands move up the income scale each year and never get any wider, and the IRS publishes the current ones as tables rather than as a formula (IRS, Publication 590-A (2025)).
The width is also not the same for every filer on a joint return. Where the subsection applies to an individual solely because their spouse is an active participant, the applicable dollar amount becomes $150,000 and the amount applicable under paragraph (2)(A)(ii) becomes $10,000, applied to that individual but not to their spouse (26 U.S.C. 219(g)(7)). Two people on the same return can therefore sit in two bands of different widths.
The rest of that computation, including the proviso that holds the limitation at $200 until the reduction closes it out entirely, is worked through in nondeductible traditional IRA contributions.
The Fixed-Step Shape, Where the Width Is Not Printed
The child tax credit reduces the credit by a set amount for each fixed block of income above a threshold, and treats a partial block as a whole one (26 U.S.C. 24(b)(1)).
Nothing in that rule names an upper end. The band runs until the reduction has consumed the credit, so its width depends on how large the credit was to begin with. Since the credit is allowed with respect to each qualifying child (26 U.S.C. 24(a)) and the reduction runs at one flat rate whatever the number of children, a return with more of them has more credit to erase and a wider band. What the step design does to a specific return, and the reason it behaves as a staircase, is set out in child tax credit.
The Percentage Shape, Where the Statute Names the Start and the Slope
The earned income credit is written as a ceiling on the credit allowable under paragraph (1) rather than as a subtraction from it, and the ceiling subtracts a phaseout percentage of the income above a phaseout amount (26 U.S.C. 32(a)(2)).
Those two defined terms are the whole design. The phaseout amount is where the band opens and the phaseout percentage is how steeply it falls, and the subsection does not name an upper end. That figure is a consequence of the other two, and the full computation, including which income the phaseout runs on, is worked through in earned income tax credit.
What the Band Does to the Next Dollar Earned
Inside a phaseout range a dollar of income does two things at once. It is taxed like any other dollar, and it also shrinks a benefit the taxpayer would otherwise have kept. The taxpayer therefore retains less of that dollar than the bracket alone suggests, and the effect stops at the top of the band, where there is no benefit left to lose.
That is worth flagging to a client before a year-end decision rather than after one, because the income that lands in the band is often the income that was easiest to move.
Common Questions About Phaseout Ranges
It depends on filing status and on whether the taxpayer or their spouse was covered by an employer retirement plan, and the operative figures are indexed rather than the ones printed in the statute (26 U.S.C. 219(g)(8)). The IRS publishes the current bands in tables and works a full example against them (IRS, Publication 590-A (2025)). The current figures and the side rules that go with them are carried in nondeductible traditional IRA contributions.
No, and the Code writes both. A hard limit switches the benefit off at a line: no credit is allowed under section 32(a) for a taxable year if the taxpayer’s aggregate disqualified income for that year exceeds the stated amount (26 U.S.C. 32(i)(1)), which is a cliff and is covered in earned income tax credit. A phaseout instead reduces the benefit across a band, and the reduction is capped so it cannot run past zero, which is what the words “but not below zero” do in the child tax credit rule (26 U.S.C. 24(b)(1)).
From the reduction rule and the size of the benefit. Divide the benefit by the rate at which the rule takes it away, and the answer is the width of the band above the threshold. Only the ratio shape hands that figure over directly, and it does so as the denominator (26 U.S.C. 219(g)(2)(A)).
Reading which shape applies, and then finding this year’s indexed figures for it, is the slow part of the work rather than the arithmetic. Accountably places trained offshore tax preparers inside US CPA and EA firms, and a firm can run a real block of its own return work through a trial task before anything client facing depends on it.
