Taxpayers are allowed for the claim of exemptions on tax returns that can decrease the sum of taxable income. You can get the advantage of two exemptions types, such as exemptions of dependents and personal exemptions. The personal-exemption allowance can decrease the sum of taxable income that can automatically reduce your tax liability. The personal exemption may vary in each year, such as it was $4,000 for 2015. If you are dependent on the tax return of another person, you are not eligible to claim a private exemption.
What is a personal exemption?
An exemption is a money that you can deduct from AGI (adjusted gross (revenue) income) for yourself and your dependents. Dependent and personal exemptions can decrease the sum of taxable income.
You have to check income caps on private exemptions. Tax exemption amount may vary for each person, such as it may be $258,250 for an unmarried and $309,900 for married people. The phase-out can decrease the exemption amount for any taxpayer with income more than thresholds.
Dependent Exemptions
You may claim exemptions for qualifying dependents. You can get one exemption for a person who is your dependent. There are different rules related to dependent, so you have to consider these rules before claiming an exemption. Keep it in mind that an exception will be for one person only. If you can claim on the tax return of someone else as a dependent, you are unable to claim your exemption.
Rules Regarding Dependents and Dependent Exemptions
Before claiming the exemptions for dependents, you have to consider some regulations regarding personal-exemption allowance:
Spouses Can’t be Dependents
A spouse can’t be a dependent so you can’t claim the exemption of dependents for your partner. You can get the advantage of a joint tax return and claim a personal exemption for yourself and another for your wife.
Worth of Dependent Exemptions
The exemption amount of a dependent may be $4,000 or more that is similar to your exemption. It means you will get a chance to claim $4,000 exemption on the tax return for every qualifying dependent. For example, a couple with two kids may claim two personal exemptions and two exemptions for kids (like dependent exemptions). It means $4,000 each, and it will be $16,000 on joint tax returns.
Adult Relatives and children Can be Dependents
A person who meets the dependency test of IRS may qualify as a dependent. You have to provide SSN (social security number) for every dependent to prerogative the exemptions. If another person claims you as his/her dependent, you will not be able to claim any other depending on your tax return.
Just like tax deductions, the personal-exemption allowance may help you to decrease your tax obligation. These personal exemptions are deducted from AGI (adjust gross revenue (income)) to arrive at taxable income. The dependent and personal exemptions may change each year, and it may increase by $50 yearly for adjustment of inflation. The phase-out levels of income to claim exemptions may tend to modify after few years. Before filing tax returns, it is essential to double check if you are eligible for a waiver.
Identify Your Relatives for Exemptions
If a person is living with you as a family member for the whole year may meet the description of a relative. He/she can be your relative even if he/she is not associated with you by marriage or blood. Here are some people that can be your relatives by marriage or blood so that you can claim their exemption.
You can claim only one exemption for each person. If you are requesting an exception, you can’t be a dependent of other taxpayers. As per IRS, children who are claimed as dependents on the tax return of his/her parents can’t claim personal exemptions on their tax returns.
Medical Expenses
You may get an ability to deduct expenses that you pay for medical treatment, diagnosis, and prevention of mental and physical illness. It can be a part of personal-exemption allowance, but you have to check the rules of your state.
Peter J. Marchiano, Jr., CPA