Claiming your eligible exemptions is very important, because exemptions directly reduce your taxable income. You are entitled to one personal exemption for yourself, one for your spouse (if filing a joint return), and one exemption for each dependent that you claim on your tax return. Knowing the criteria and requirements for claiming these exemptions will facilitate the preparation of your individual income tax return, and will ensure that you do not miss out on important tax benefits.

Exemptions are fixed amounts, calculated on a per person basis, and they reduce the amount of your income that is subject to income tax.
The exemption amounts are generally increased year by year, as adjusted for inflation, and the amount for tax year 2014 is $3,950 ($4,000 for tax year 2015). Each person for whom you claim an exemption must have a valid Social Security number or other valid tax identification number.

Since exemptions directly reduce your taxable income, ultimately, they will either increase your refund or reduce your tax liability. There are two types of exemptions: (a) personal exemptions, and (b) exemptions for dependents.

Your Personal Exemption

You can generally claim one exemption for yourself, and if you are married filing and a joint return, you may claim an exemption for your spouse. These are your personal exemptions. It is important to note that you can claim an exemption for your spouse only because you are married. Your spouse is never considered your dependent for tax purposes, and that is why an exemption for your spouse is considered a personal exemption.

It is very important to note that you cannot take a personal exemption for yourself if another person can claim you as a dependent. Note also, that even if that other person who could claim you did not do so, you still cannot claim your personal exemption.

If you are married, the rules for claiming the personal exemption for your spouse are as follows:

• You can claim one exemption for your spouse if you file a joint return with your spouse.
• If you are filing separately from your spouse, you can claim one exemption for your spouse, but ONLY if your spouse: (a) has no gross income, (b) filed no tax return, and (c) was not the dependent of another taxpayer. In tax law, your spouse in never considered your dependent.
• If you are divorced or legally separated at the end of the tax year, you cannot claim the exemption for your former spouse.
• If your spouse died during the year, and you would have been able to file a joint return with your spouse, you can still claim an exemption for your deceased spouse, provided you did not remarry before the end of the year.

Note that if you’re filing MFS, and your spouse could be claimed as someone else’s dependent, you cannot claim you spouse’s exemption, even if the other taxpayer does not claim the exemption for your spouse.

If you are a non-resident alien, generally you can only claim an exemption for yourself. You cannot claim an exemption for your spouse or any dependents.

Exemptions for Your Dependents

You are allowed one exemption for each person you claim as a dependent on your tax return. Even if your dependent files a return, you still may be able to claim a personal exemption for him or her.

Your dependent must be either your qualifying child or your qualifying relative, and must have a valid identifying number. This number can be any of the following:

• Social Security number
• Individual Taxpayer Identification number
• Adoption Taxpayer Identification number

The primary objective of this article is to empower taxpayers to learn to do their own taxes. For information on how to claim your dependent exemptions, grab yourself a copy of “Doing Your Own Taxes is as Easy as 1, 2, 3,” ($6.98) on TaxConnections.com.  Feel free to connect with me on TaxConnections to discuss.