Tax Basics:
Calculating Personal and Dependent Exemptions
Each exemption you are entitled to claim reduces your taxable income by $2,750. There are two kinds of exemptions--personal and dependent. As far as personal exemptions go, you can take one for yourself and, if you are married, one for your spouse. Here are some rules to be followed in taking personal exemptions:
- You can only take the one exemption for yourself if you cannot be claimed as a dependent on someone else's tax return. Even if your parents can claim you as a dependent and chose not to, you are still not allowed to take a personal exemption on your tax return.
- If married and filing jointly, a personal exemption can also be taken for your spouse as long as he or she cannot be claimed by another as a dependent on their tax returns.
- If you are married and file a separate return, you may claim your spouse as a dependent only if your spouse is not filing a tax return, had no income and cannot be claimed as a dependent on another's tax return.
- If by the end of the year, you have obtained a final decree of divorce or separate maintenance, you cannot take an exemption for your spouse, even if you provided all of his or her support.
- If your spouse died in the last year and you did not remarry, you may claim an exemption for your spouse, but only if you file jointly.
- If your spouse died in the last year, and you file a separate return, you can claim an exemption for your spouse only if the spouse had no income and cannot be claimed as a dependent on someone else's tax return.
You can claim a dependent exemption for a dependent if you provide more than half of his or her support and this person passes the five dependency tests. Any person who meets all five of the following tests qualifies as your dependent:
- Your dependent must live with you the entire year. However, if this person is a blood relative or related through marriage, this person does not have to live with you for the entire year. Temporary absences are ignored, such as if a person has been placed in a nursing home. Some other details to consider:
- A person who dies during the year but was a member of your household until death qualifies. A child who was born and died in the same year also qualifies, although a stillborn does not.
- A person does not meet the member of your household test if your relationship violates a local law.
- A child qualifies for the member of household test before the adoption is legal if he or she was placed with you for adoption by an authorized adoption agency and the child was a member of your household. Otherwise, the child must be a member of your household for the entire tax year.
- A foster child must live with you for the entire year to qualify as a dependent. If a government agency makes payments to you for caring for the child, you may not claim them as a dependent.
- If the dependent is married and files a joint return with his spouse, you may not claim this person as an exemption. However, if this person and their spouse file jointly to get a refund of all tax withheld, you may be able to claim this person if the other four tests are met.
- The dependent must meet the following criteria:
- Must be a citizen or resident alien of the US
- A resident of Canada or Mexico
- An adopted child who is not a US citizen and lives with you all year in a foreign land
- The dependent's gross income must be less than $2,750 except if:
- He or she was under the age of 19 at the end of the year
- He or she was under the age of 24 at the end of the year and was a full-time student
- You must have provided over half the dependent's support throughout the year.