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Dependent Credit Phase-Out Calculator

Enter the full credit, your income, and the phase-out threshold and step.

How it is calculated

First the tool finds the income above the threshold: excess = max(0, income − threshold). It then counts how many steps that excess covers, rounding up because a started step counts in full: steps = ceil(excess ÷ step). The reduction is steps × reduction per step, and final credit = max(0, credit − reduction), so the credit never goes negative. All five fields are required and the step must be above zero. The rules are entered by you: the tool does not know any country's or year's actual credit amount, threshold or step, and those differ between countries and change over time, so take them from the current official instructions.

Worked example

Full credit $2,000. Phase-out starts at $200,000 income; the credit falls by $50 for every $1,000 (or part of $1,000) above that. Income is $215,400. Excess: 215,400 − 200,000 = $15,400. Steps: 15,400 ÷ 1,000 = 15.4, rounded up to 16. Reduction: 16 × 50 = $800. Remaining credit: 2,000 − 800 = $1,200.00. Had income been exactly $215,000 the count would be 15 and the credit $1,250.

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Common mistakes

  • Dividing the excess and truncating instead of rounding up. A partial step still triggers a full reduction here, so $15,400 over counts as 16 steps, not 15.
  • Entering the reduction as a percentage. The field is a money amount taken off per step, not a percent of the credit.
  • Using the wrong income measure. Phase-out thresholds are usually set on a specific definition of income (for example adjusted or modified), not on salary alone; enter the figure your rules name.
  • Putting the credit per child while the threshold applies to the whole return, or the reverse. Enter the total credit that the phase-out applies to.
  • Assuming a bonus is taxed lightly. Because each started step costs the full reduction, income just over the threshold can cut the credit sharply.

Sources

About this calculator

Many dependent-related tax credits are not flat — above a certain income threshold, the credit is reduced by a fixed amount for every increment of income over that threshold, a mechanism often called a phase-out. The remaining credit is calculated as: full credit − (reduction step × number of increments by which income exceeds the threshold), floored at zero once the credit is fully phased out.

This calculator takes the full credit amount, your income, the phase-out threshold, and the reduction step, and returns how much credit actually remains. Tax preparers and individual filers use it to estimate their real credit before filing rather than assuming the full statutory amount, and payroll and HR professionals use the same phase-out logic when helping employees understand how a raise or bonus might unexpectedly shrink a dependent-related credit they were counting on.

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Comments (1)

  • Editorial team

    Every started step counts in full, so the cliff sits right at the threshold. With a 2000 credit, a threshold of 400000, steps of 1000 and 50 off per step, an income of 400000 keeps the whole credit, yet 400001 already brings it to 1950.00. Before a bonus or a year-end sale, run your income just under and just over the line to see what the extra earnings really cost. Which credit rules are you testing this with?

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