March 21, 2016 • Brittany Benson – The Tax Institute
Brittany Benson – The Tax Institute
As a first time filer, there may be many unfamiliar tax terms when filing your return. We’re here to help with the basics.
One of the most commonly used (and oldest) tax concepts is the personal exemption. What exactly is a personal exemption? Should you claim a personal exemption for yourself and for your spouse on your return?
Generally, tax exemptions reduce the taxable income on a return. There are many kinds of tax exemptions; however, personal exemptions are included on nearly every individual return filed in the U.S.
You can claim a personal exemption for yourself unless someone else can claim you as a dependent. Note that’s if they can claim you, not whether they actually do. If you qualify as someone else’s dependent, you can’t claim the personal exemption even if they don’t actually claim you on their return.
Additionally, in order to claim a personal exemption, you will have to file a tax return. If your gross income is over the filing threshold and no one can claim you as a dependent, you can claim a personal exemption for yourself when you file your return.
You can also claim an exemption for your spouse if you file a joint return. However, if you both are nonresident aliens (other than a resident of Canada or Mexico, or certain residents of India or South Korea), you may only claim one personal exemption on the tax return. These restrictions don’t apply if you are a nonresident alien married to a U.S. citizen or if you are a resident alien who has chosen to be treated as a resident of the United States.
If you file a separate return you can claim an exemption for your spouse only if your spouse had no gross income, is not filing his or her own return and was not the dependent of another taxpayer (even if the spouse is not actually claimed by another taxpayer). If your spouse meets these rules, you can claim an exemption for your spouse on a separate return even if he or she is a nonresident alien, as long as they have a tax identification number.
Note that if you have any dependents, you can generally claim a dependent exemption for them if they meet the qualifying child or qualifying relative test.
For 2015, the personal exemption amount is $4,000. Personal exemptions are claimed on Form 1040 lines 6a, 6b, and line 42.
You lose at least part of the benefit of your exemptions if your adjusted gross income is more than a certain amount. For 2015, this amount is $154,950 for a married individual filing a separate return; $258,250 for a single individual; $284,050 for a head of household; and $309,900 for married individuals filing jointly or a qualifying widow(er).
Brittany Benson – The Tax Institute
Greetings, tax enthusiasts! I am a seasoned tax professional with a wealth of knowledge and hands-on experience in the intricate world of taxation. Over the years, I have navigated through the complexities of the tax code, staying abreast of the latest updates and nuances in this ever-evolving field. My expertise is not just theoretical; I have actively assisted individuals and businesses in understanding and optimizing their tax obligations.
Now, let's delve into the article dated March 21, 2016, by Brittany Benson from The Tax Institute. The piece aims to enlighten first-time filers on the basics of tax terms, with a focus on the personal exemption, one of the oldest and most commonly used tax concepts.
Personal Exemption:
The personal exemption is a fundamental concept in taxation that plays a crucial role in reducing taxable income on a return. The article clarifies that individuals can claim a personal exemption for themselves unless they qualify as dependents on someone else's return. Importantly, eligibility to claim a personal exemption is determined by meeting certain criteria, irrespective of whether the person is actually claimed as a dependent.
Filing Requirements:
To claim a personal exemption, the article emphasizes the need to file a tax return. If an individual's gross income exceeds the filing threshold and they are not claimed as a dependent, they can claim a personal exemption for themselves. The filing status, such as joint return or separate return, also influences the eligibility to claim exemptions.
Spousal Exemption:
The article highlights that joint filers can claim an exemption for their spouse. However, limitations exist for nonresident aliens, with certain exceptions for those married to U.S. citizens or choosing to be treated as U.S. residents. If filing separately, an exemption for a spouse is possible under specific conditions, including the spouse having no gross income and not being the dependent of another taxpayer.
Dependent Exemption:
For individuals with dependents, the article outlines the criteria for claiming a dependent exemption. This includes meeting the qualifying child or qualifying relative test.
Monetary Value:
In 2015, the personal exemption amount is stated as $4,000. The article further notes that the benefit of exemptions diminishes if the adjusted gross income exceeds specific thresholds, varying based on filing status.
Thresholds for 2015:
- Married filing separately: $154,950
- Single individual: $258,250
- Head of household: $284,050
- Married filing jointly or qualifying widow(er): $309,900
This comprehensive overview from Brittany Benson provides valuable insights into the personal exemption and related tax concepts, serving as a helpful guide for first-time filers navigating the intricate terrain of tax obligations.
FAQs
When can a taxpayer claim personal exemptions? To claim a personal exemption, the taxpayer must be able to answer “no” to the intake question, “Can anyone claim you or your spouse as a dependent?” This applies even if another taxpayer does not actually claim the taxpayer as a dependent.
What is the personal exemption for single filers? ›
Since 1990, personal exemptions phased out at higher income levels. In 2017, the phaseout began at $261,500 for singles and $313,800 for married couples filing a joint return. Personal exemptions were completely phased out at $384,000 for singles and $436,300 for married couples.
How many personal and dependent exemptions should I claim? ›
An individual can claim two allowances if they are single and have more than one job, or are married and are filing taxes separately. Usually, those who are married and have either one child or more claim three allowances.
Is it better to claim 1 or 0 on your taxes? ›
By placing a “0” on line 5, you are indicating that you want the most amount of tax taken out of your pay each pay period. If you wish to claim 1 for yourself instead, then less tax is taken out of your pay each pay period.
What is the benefit of claiming an exemption? ›
Tax exemptions come in many forms, but one thing they all have in common is they either reduce or entirely eliminate your obligation to pay tax. Most taxpayers are entitled to an exemption on their tax return that reduces your tax bill in the same way a deduction does.
Can I claim my wife as a personal exemption? ›
For tax years beginning before 2018 and after 2025, if the individual is married and files a joint return, a personal exemption may be also be claimed for the taxpayer's spouse. If a married individual files a separate return, a personal exemption may be claimed for his or her spouse in limited circ*mstances.
Can I claim a personal exemption for myself? ›
Significant changes occurred with the implementation of the Tax Cuts and Jobs Act, signed into law in 2017. As a result, individuals could no longer claim a specific dollar amount as a personal exemption for: Themselves.
What is the standard deduction for a single person? ›
2022 vs. 2023 Standard Deduction
| Filing Status | Standard Deduction 2022 | Standard Deduction 2023 |
|---|
| Single | $12,950 | $13,850 |
| Married, Filing jointly | $25,900 | $27,700 |
| Married, Filing separately | $12,950 | $13,850 |
| Head of Household | $19,400 | $20,800 |
There are two types of exemptions-personal and dependency. Each exemption reduces the income subject to tax.
Will I owe money if I claim 1? ›
Claiming 1 on Your Taxes
Claiming 1 reduces the amount of taxes that are withheld, which means you will get more money each paycheck instead of waiting until your tax refund. You could also still get a small refund while having a larger paycheck if you claim 1.
A single filer with no children should claim a maximum of 1 allowance, while a married couple with one source of income should file a joint return with 2 allowances. You can also claim your children as dependents if you support them financially and they're not past the age of 19.
What is the difference between dependent exemptions and personal exemptions? ›
You can claim a personal exemption for yourself unless someone else can claim you as a dependent. Note that's if they can claim you, not whether they actually do. If you qualify as someone else's dependent, you can't claim the personal exemption even if they don't actually claim you on their return.
Why do I still owe taxes if I claim 0? ›
If you claimed 0 and still owe taxes, chances are you added “married” to your W4 form. When you claim 0 in allowances, it seems as if you are the only one who earns and that your spouse does not. Then, when both of you earn, and the amount reaches the 25% tax bracket, the amount of tax sent is not enough.
How do I fill out a W4 to get the most money? ›
To receive a bigger refund, adjust line 4(c) on Form W-4, called "Extra withholding," to increase the federal tax withholding for each paycheck you receive. Tax withholding calculators help you get a big picture view of your refund situation by asking detailed questions.
How do I know what to claim on my W4? ›
Here's your rule of thumb: the more allowances you claim, the less federal income tax your employer will withhold from your paycheck (the bigger your take home pay). The fewer allowances you claim, the more federal income tax your employer will withhold from your paycheck (the smaller your take home pay).
Why would you owe money if you claimed 0 exemptions? ›
When you claim 0 in allowances, it seems as if you are the only one who earns and that your spouse does not. Then, when both of you earn, and the amount reaches the 25% tax bracket, the amount of tax sent is not enough. You will hence need to pay the IRS some money.
How much is exemption for dependents? ›
In determining who is a dependent for these other tax benefits, the exemption amount is $5,050 for 2024, $4,700 for 2023, $4,400 for 2022, $4,300 for 2021, and $4,300 for 2020.
What is an exemption is it good or bad for your taxes? ›
Tax exemptions whittle down what counts as income in the first place; that is, exemptions usually come right off the top. Tax deductions generally are expenses you've incurred that whittle down the amount of your income that's subject to tax.
Who qualifies for dependent exemption? ›
The child must be: (a) under age 19 at the end of the year and younger than you (or your spouse, if filing jointly), (b) under age 24 at the end of the year, a full- time student, and younger than you (or your spouse, if filing jointly), or (c) any age if permanently and totally disabled. 2.
