Final answer:
Jax, with an AGI of $184,000 and claiming his son Zander, may be eligible to receive the full Credit for Other Dependents of up to $500. The phase-out for this credit begins at $200,000 for single filers, so Jax's income does not exceed that threshold. Discussions about the Earned Income Tax Credit also highlight how tax policy is designed to avoid the poverty trap by phasing out benefits gradually.
Step-by-step explanation:
The question pertains to the Credit for Other Dependents (COD) in the context of Jax, who files single and claims his 20-year-old son, Zander, on his taxes. Jax has an adjusted gross income (AGI) of $184,000. The Credit for Other Dependents, which is a part of the US tax code, allows taxpayers to claim a credit for dependents who do not qualify for the Child Tax Credit. For 2018 and later, the COD is up to $500 for each qualifying dependent.
However, the availability of this tax credit is subject to income thresholds, which means it begins to phase out for taxpayers with AGI above certain amounts. For a single filer, the phase-out begins at an AGI of $200,000, which means Jax could potentially claim the full credit amount since his AGI is below this threshold. If Jax was earning an amount which caused the credit to phase out, the value of the COD would decrease until it's no longer available.
It is also important to address the wider context of the discussion around tax credits, such as the Earned Income Tax Credit (EITC). The EITC has a phase-out mechanism to avoid a poverty trap, where each additional dollar earned results in nearly a dollar reduction in government support. To address this, the EITC is designed to sustain a benefit up to a certain earning threshold where it begins to slowly decrease. For instance, as indicated by the Tax Policy Center, for a single-parent family with two children in 2013, the EITC does not decrease as earnings go from $13,430 to $17,530 and then it phases out gradually. Specifically, for every dollar above $17,530, the credit decreases by 21.06 cents until it's entirely phased out after reaching an income level of $46,227.
The challenge posed by the poverty trap is mitigated by such careful considerations in tax policy to ensure that working individuals can benefit from the aid without being penalized for earning more and striving towards financial stability.