Personal and Dependent Exemptions
Facts About Claiming Exemptions on Your Tax Return
Generally, taxpayers are allowed to claim exemptions on their tax returns that reduce their amount of taxable income. There are two main types of exemptions: personal exemptions and exemptions for dependents. These exemptions lower the amount of your income that is subject to tax, which in turn, reduces the amount of tax you owe.
For tax year 2015, the standard personal exemption amount is $4,000 per person. Keep in mind though, if you can be claimed as a dependent on another person’s tax return, you cannot claim a personal exemption for yourself. (This is not to be confused with the standard deduction, which all taxpayers can use.)
There are income caps on personal exemptions. For tax year 2015, the personal exemption phase-out begins at $258,250 for single filers ($309,900 for married couples). The phase-out gradually reduces the exemption amount for taxpayers with incomes above those thresholds.
You can claim exemptions for your qualifying dependents as well. You are allowed one exemption for each person who can be claimed as your dependent. However, there are several rules regarding who is considered a dependent and whether you can claim an exemption for them on your tax return.
Remember that only one exemption can be claimed for each person — for example, if you can be claimed as a dependent on someone else’s tax return, you cannot also claim a personal exemption for yourself. This is true even if the qualifying dependent must file his or her own tax return.
Here are some rules to keep in mind regarding dependents and claiming dependent exemptions:
Spouses cannot be claimed as dependents. Your spouse is never considered your dependent. Therefore, you cannot claim a dependent exemption for your spouse. However, if you are married filing a joint return, you can claim one personal exemption for yourself and one for your spouse.
Dependent exemptions are worth the same as personal exemptions. For tax year 2015, the dependent exemption amount is $4,000, which is the same as the personal exemption. This means you can claim a $4,000 exemption on your tax return for each qualifying dependent. For example, a married couple with two children could potentially claim two personal exemptions ($4,000 each) and two dependent exemptions ($4,000 each) on their joint tax return ($16,000 = total exemption amount).
Children and adult relatives can be claimed as dependents. Anyone who meets the IRS’ dependency tests can qualify as your dependent. You will need to provide the Social Security Number (SSN) for each of your dependents in order to claim the exemption(s). However, if another person can claim you as a dependent, you are not allowed to claim any dependents on your tax return.
Similar to tax deductions, personal and dependent exemptions can help reduce your tax liability. These exemptions are subtracted from your AGI (adjusted gross income) to arrive at your taxable income.
The amount of the personal and dependent exemption often changes from year-to-year; it usually increases by $50 annually to adjust for inflation. The income phase-out levels for claiming exemptions also tend to change every few years. Before you file your tax return, make sure to double-check whether you qualify for the exemptions.
For more information, please see IRS Publication 501 (Exemptions, Standard Deduction, and Filing Information) and IRS Publication 17 (Your Federal Income Tax for Individuals).