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Personal Exemption Deduction


Personal exemption deduction is allowed individual taxpayer, spouse, and children or other dependents. The personal exemption is allowed as a deduction against the taxpayer's income to reach the taxable income.

The amount you can deduct for each exemption is $3,650 in 2010.

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. 

You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico. However, there is an exception for certain adopted children, as explained next.
 

 

Tests To Be a Qualifying Child        Tests To Be a Qualifying Relative
  1. The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.

  2. 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.

  3. The child must have lived with you for more than half of the year.2

  4. The child must not have provided more than half of his or her own support for the year.

  5. The child is not filing a joint return for the year (unless that return is filed only as a claim for refund).

  6. If the child meets the rules to be a qualifying child of more than one person, you must be the person entitled to claim the child as a qualifying child.

 
  1. The person cannot be your qualifying child or the qualifying child of any other taxpayer.

  2. The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you , or (b) must live with you all year as a member of your household2 (and your relationship must not violate local law).

  3. The person's gross income for the year must be less than $3,650.3

  4. You must provide more than half of the person's total support for the year.4




Phaseout of Exemptions

The amount you can claim as a deduction for exemptions is reduced once your adjusted gross income (AGI) goes above a certain level for your filing status. These levels are as follows:

  

Filing Status   AGI Level That Reduces Exemption Amount
Married filing separately   $ 125,100
Single   166,800
Head of household   208,500
Married filing jointly   250,200
Qualifying widow(er)   250,200

  

You must reduce the dollar amount of your exemptions by 2% for each $2,500, or part of $2,500 ($1,250 if you are married filing separately), that your AGI exceeds the amount shown above for your filing status. However, you can lose no more than 1/3 of the dollar amount of your exemptions. In other words, each exemption cannot be reduced to less than $2,433.

  

If your AGI exceeds the level for your filing status, use the Deduction for Exemptions Worksheet in the instructions for Form 1040 or Form 1040A to figure the amount of your deduction for exemptions. However, if you are claiming a $500 exemption for housing a Midwestern displaced individual, use Form 8914 instead.


How to claim personal exemptions.
If you file Form 1040EZ, the exemption amount is combined with the standard deduction amount and entered on line 5. If you file Form 1040A or Form 1040, follow the instructions for the form. The total number of exemptions you can claim is the total in the box on line 6d. Also complete line 26 (Form 1040A) or line 42 (Form 1040). , to use it in your tax return, please click here.
 
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