(3) Phaseout
(A) In general
In the case of any taxpayer whose adjusted gross income for the taxable year exceeds the threshold amount, the exemption amount shall be reduced by the applicable percentage.
(B) Applicable percentage
For purposes of subparagraph (A), the term applicable percentage means 2 percentage points for each $2,500 (or fraction thereof) by which the taxpayers adjusted gross income for the taxable year exceeds the threshold amount. In the case of a married individual filing a separate return, the preceding sentence shall be applied by substituting $1,250 for $2,500. In no event shall the applicable percentage exceed 100 percent.
(C) Threshold amount For purposes of this paragraph, the term threshold amount means
(i) $150,000 in the case of a joint return or a surviving spouse (as defined in section
2 (a)),
(ii) $125,000 in the case of a head of a household (as defined in section
2 (b),1
(iii) $100,000 in the case of an individual who is not married and who is not a surviving spouse or head of a household, and
(iv) $75,000 in the case of a married individual filing a separate return.
For purposes of this paragraph, marital status shall be determined under section 7703.
(D) Coordination with other provisions
The provisions of this paragraph shall not apply for purposes of determining whether a deduction under this section with respect to any individual is allowable to another taxpayer for any taxable year.
(E) Reduction of phaseout
(i) In general In the case of taxable years beginning after December 31, 2005, and before January 1, 2010, the reduction under subparagraph (A) shall be equal to the applicable fraction of the amount which would (but for this subparagraph) be the amount of such reduction.
(ii) Applicable fraction For purposes of clause (i), the applicable fraction shall be determined in accordance with the following table:
(F) Termination
This paragraph shall not apply to any taxable year beginning after December 31, 2009.
(4) Inflation adjustments
(A) Adjustment to basic amount of exemption In the case of any taxable year beginning in a calendar year after 1989, the dollar amount contained in paragraph (1) shall be increased by an amount equal to
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section
1 (f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 1988 for calendar year 1992 in subparagraph (B) thereof.
(B) Adjustment to threshold amounts for years after 1991 In the case of any taxable year beginning in a calendar year after 1991, each dollar amount contained in paragraph (3)(C) shall be increased by an amount equal to
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section
1 (f)(3) for the calendar year in which the taxable year begins, by substituting calendar year 1990 for calendar year 1992 in subparagraph (B) thereof.
