the correct bonus senior deduction for a Married Filing Jointly (MFJ) couple with an Adjusted Gross Income (AGI) of $223,479 is $3,182.52. This amount is derived from calculating the phase-out for each spouse individually and then combining the results.
Your bug report was correct in identifying that applying the phase-out to the couple's total potential bonus of $12,000 is an incorrect methodology.
The correct calculation broken down
Determine individual bonus amount: Each qualifying spouse is eligible for a bonus deduction of up to $6,000.
Calculate excess income: The phase-out is based on the couple's combined Modified Adjusted Gross Income (MAGI), which in this case is the AGI of $223,479. The threshold for MFJ is $150,000.
Excess Income = $223,479 - $150,000 = $73,479
Apply phase-out to each bonus: The 6% phase-out is applied to the excess income, and this reduction is applied to each individual's potential $6,000 bonus.
Reduction = $73,479 × 0.06 = $4,408.74
Calculate remaining bonus per spouse:
Bonus Per Person = $6,000 - $4,408.74 = $1,591.26
Calculate total bonus for the couple: Since both spouses are over 65, the individual bonuses are combined.
Total Bonus = $1,591.26 + $1,591.26 = $3,182.52.
NOT LIKE THIS...
Breakdown of the calculation
Maximum Potential Bonus: Since both spouses are over 65, the couple's maximum potential bonus is $12,000 ($6,000 per person).
Phaseout Threshold: The phaseout begins when the couple's Modified Adjusted Gross Income (MAGI) exceeds $150,000. It is fully phased out at $250,000. The AGI of $223,479 is used here as a substitute for MAGI.
Income Exceeding Threshold: The amount of income over the threshold is calculated as follows:
$223,479 (AGI) - $150,000 (threshold) = $73,479
Total Reduction: The deduction is reduced by 6 cents for every dollar over the threshold:
$73,479 × 0.06 = $4,408.74
Final Bonus Deduction: The reduction is subtracted from the couple's maximum potential bonus:
$12,000 - $4,408.74 = $7,591.26.
