Exemption
From Wikicpa
Exemptions reduce your taxable income. Generally, you can deduct $3,500 (3,400 in 2007) for each exemption you claim in 2008. If you are entitled to two exemptions for 2008, you would deduct $7,000 ($3,500 × 2). But you may lose the benefit of part or all of your exemptions if your adjusted gross income is above a certain amount. - See phaseout rules below.
You usually can claim exemptions for yourself, your spouse, and each person you can claim as a dependent. Types of exemptions. There are two types of exemptions: personal exemptions and exemptions for dependents. While each is worth the same amount ($3,500 for 2008), different rules, discussed later, apply to each type.
Who cannot claim a personal exemption. If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim a personal exemption on his or her own tax return.
For 2006 an exemption for individual displaced by Hurricane Katrina is available. You may be able to claim a $500 exemption if you provided housing to a person displaced by Hurricane Katrina.
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How to claim exemptions
How you claim an exemption on your tax return depends on which form you file.
Form 1040EZ filers. If you file Form 1040EZ, the exemption amount is combined with the standard deduction and entered on line 5.
Form 1040A filers. If you file Form 1040A, complete lines 6a through 6d. The total number of exemptions you can claim is the total in the box on line 6d. Also complete line 26 by multiplying the number in the box on line 6d by $3,500.
Form 1040 filers. If you file Form 1040, complete lines 6a through 6d. On line 42, multiply the total exemptions shown in the box on line 6d by $3,500 and enter the result.
Personal Exemptions
You are generally allowed one exemption for yourself and, if you are married, one exemption for your spouse. These are called personal exemptions.
Your Own Exemption
You can take one exemption for yourself unless you can be claimed as a dependent by another taxpayer. If another taxpayer is entitled to claim you as a dependent, you cannot take an exemption for yourself even if the other taxpayer does not actually claim you as a dependent. Your Spouse's Exemption
Your spouse is never considered your dependent. Joint return. On a joint return, you can claim one exemption for yourself and one for your spouse.
Separate return. If you file a separate return, you can claim the exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. This is true even if the other taxpayer does not actually claim your spouse as a dependent. This is also true if your spouse is a nonresident alien.
Head of household. If you qualify for head of household filing status because you are considered unmarried, you can claim an exemption for your spouse if the conditions described in the preceding paragraph are satisfied.
To claim the exemption for your spouse, check the box on line 6b of Form 1040 or Form 1040A and enter the name of your spouse in the space to the right of the box. Enter the SSN or ITIN of your spouse in the space provided at the top of Form 1040 or Form 1040A.
Death of spouse. If your spouse died during the year, you generally can claim your spouse's exemption under the rules just explained in Joint return and Separate return.
If you remarried during the year, you cannot take an exemption for your deceased spouse.
If you are a surviving spouse without gross income and you remarry in the year your spouse died, you can be claimed as an exemption on both the final separate return of your deceased spouse and the separate return of your new spouse for that year. If you file a joint return with your new spouse, you can be claimed as an exemption only on that return.
Divorced or separated spouse. If you obtained a final decree of divorce or separate maintenance by the end of the year, you cannot take your former spouse's exemption. This rule applies even if you provided all of your former spouse's support.
Exemptions for Dependents
You are allowed one exemption for each person you can claim as a dependent. You can claim an exemption for a dependent even if your dependent files a return.
Beginning in 2005, the term “dependent” means:
- A qualifying child, or
- A qualifying relative.
The terms “qualifying child” and “qualifying relative” are defined later.
You can claim an exemption for a qualifying child or qualifying relative only if these three tests are met.
- Dependent taxpayer test
- Joint return test.
- Citizen or resident test.
Phaseout of Exemptions
Also see
