Taxes From A To Z (2014): P Is For Personal Exemption

Mar 29 2014, 7:33pm CDT | by

Taxes From A To Z (2014): P Is For Personal Exemption
Photo Credit: Forbes Business
P is for Personal Exemption.

After you’ve figured your deductions and adjustments to income, you have one last stab at reducing your taxable income: personal exemptions. Personal exemptions further decrease your taxable income before you determine your tax. For 2013, the personal exemption amount is $3,900 (it’s $3,950 for 2014).

You are generally allowed one exemption for yourself unless you can be claimed as a dependent by another taxpayer. If you can be claimed as a dependent by another taxpayer, you cannot claim the personal exemption for yourself even if the other taxpayer doesn’t actually claim you on their return.

Your spouse is never considered your dependent. You may, however, be able to claim a personal exemption for your spouse depending on your circumstances:

  • If you are married and you file a joint return, you can generally claim one exemption for yourself and one for your spouse.
  • If you are married and you file a separate return, you can generally claim one exemption for yourself but you cannot always claim your spouse. You can claim an exemption for your spouse only if he or she had no gross income, is not filing a return, and was not the dependent of another taxpayer.
  • If your spouse died during the year and you file a joint return, you can generally claim one exemption for yourself and one for your deceased spouse. However, if you remarry during the year, you cannot take an exemption for your deceased spouse (some exceptions apply).
  • If you were divorced or separated during the year, you can generally claim one exemption for yourself but you cannot claim your former spouse’s exemption. This is true even if you provided all of your former spouse’s support during the year.

You can claim one personal exemption for each of your dependents. This is true even if your dependent files his or her own return. However, as above, if you can claim an exemption for your dependent, the dependent cannot claim his or her own personal exemption on his or her own tax return. This is true even if you do not claim the dependent’s exemption on your return (this is where a lot of students get into trouble).

If you don’t include your dependent’s Social Security number on the return or if you use the wrong number, the personal exemption may be disallowed. Nowadays, almost all babies born in hospitals are assigned Social Security numbers pretty quickly. If you don’t have one for your dependent born in 2013, you’ll want to apply for one (use form SS-5, downloads as a pdf) and likely file for an extension for your taxes.

You figure your personal exemption amount on line 42 of your form 1040. That amount, however, is based on the number of exemptions you claim on the front of your return.

Personal exemptions do have limits and those limits are based on your income. You lose part of the benefit of your personal exemptions once your adjusted gross income reaches a certain amount – this is referred to as the personal exemption phaseout, or PEP. For 2013, those phaseouts begin at $250,000 for individual taxpayers; $275,000 for taxpayers filing as head of household; $300,000 for married taxpayers filing jointly or qualifying widow(er); and $150,000 for married taxpayers filing separate. PEP reduces the total personal exemption by 2% by those taxpayers over those amounts. This means that taxpayers completely lose the benefit of personal exemptions at $372,500 for individual taxpayers and $422,500 for married taxpayers filing jointly.

For more in the series, see:

Want more taxgirl goodness? Pick your poison: receive posts by email, follow me on twitter (@taxgirl), hang out with me on Facebook or check out my YouTube channel. If you want to keep an eye on documents I’ve posted, check out my profile on Scribd. And finally, you can subscribe to my podcast on the site or via iTunes (it’s free).

Source: Forbes Business


Don't miss ...


<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.


blog comments powered by Disqus

Latest stories

WhatsApp behind half of Italian divorce cases: Attorney group
Rome, Nov 20 (IANS) Almost half of the divorce cases in Italy rely at least in part on information gathered through the instant messaging service WhatsApp, according to the Italian Association of Matrimonial Lawyers.
Modi among contenders for Time's Person of the Year
New York, Nov 20 (IANS) Indian Prime Minister Narendra Modi is in the list of 50 contenders for Time magazine's Person of the Year.
Atomic clock that fits in your pocket
Washington, Nov 20 (IANS) Researchers, including an Indian-origin scientist, are working on a highly accurate atomic clock the size of a Rubik's cube, measuring about 2 inches in each dimension.
New insight into cells may lead to better drugs
London, Nov 20 (IANS) In a significant revelation that may help scientists create better drugs, a team of British researchers have found how different types of immune cells communicate with each other and how they kill cancerous or infected cells.

Latest from the Network

Hostilities, human rights violations continue in Ukraine: OHCHR
Geneva, Nov 20 (IANS) Hostilities, human rights violations and abuses continued in eastern Ukraine despite the announcement of the Sep 5 ceasefire, a report released by the Office of the UN High Commissioner for Human...
Read more on Politics Balla
Carrie Underwood learned baby news at dinner
Carrie Underwood learned she was expecting a baby boy while having dinner with her husband. The 'Something In the Water' singer and spouse Mike Fisher are expecting their first child together but felt the sonographer's...
Read more on Celebrity Balla
Keira Knightley's fan fear
Keira Knightley finds Benedict Cumberbatch's fans terrifying. The 29-year-old actress insists her 'Imitation Game' co-star's devoted female followers - who are dubbed 'The Cumberbitches' - are ''lovely'' but she finds...
Read more on Celebrity Balla
Sheryl Crow selling boots for charity
Sheryl Crow is selling her cowboy boots for charity. The 'Soak Up The Sun' hitmaker has decided to offload the clothes, shoes and accessories she no longer wears on eBay's Charity Shop to raise money for the Feeding...
Read more on Celebrity Balla
Charlie Day has Zac Efron shrine
Charlie Day has a Zac Efron shrine in his house. The 'Horrible Bosses' 2' star lives next door to the 27-year-old actor and fans of the hunk often get confused which house is his so they end up leaving their love...
Read more on Celebrity Balla
Amazon Black Friday 2014 Sale begins Tomorrow
The Amazon Black Friday 2014 Sale will already begin this Friday 11/21. Amazon just announced to launch their Black Friday sale earlier than ever before. In past years the Amazon Black Friday deals week started on...
Read more on Black Friday Countdown
Paul Greengrass to direct 1984
Paul Greengrass will direct the '1984' film. According to Deadline, the 59-year-old director has been hired by Sony Pictures to helm the latest big screen version of George Orwell's dystopian novel, which was first...
Read more on Movie Balla
Sony Pictures drop Steve Jobs biopic
Sony Pictures has pulled out of the planned Steve Jobs biopic. A movie about the Apple co-founder - who tragically passed away from pancreatic cancer in 2011, aged 56 - has been in the works for several months, but the...
Read more on Movie Balla
The Graduate director Mike Nichols dies
Mike Nichols has died. The acclaimed filmmaker passed away due to a cardiac arrest on Wednesday (19.11.14) at the age of 83, an ABC spokesperson has announced. The Hollywood icon won the Academy Award for Best Director...
Read more on Movie Balla
Kevin James to be a dad again
Kevin James is to be a father for the fourth time. The 49-year-old actor and his 40-year-old wife Steffiana de la Cruz are expecting another baby, which will be a sibling for their daughters Sienna-Marie, nine, and Shea...
Read more on Celebrity Balla