What Are Tax Exemptions?

What Are Tax Exemptions?

Tax exemptions reduce your adjusted gross income, ensuring that not all of your income is taxed.

Your total exemptions, along with your standard deduction or itemized deductions, are subtracted from your adjusted gross income to figure your taxable income.

Tax exemptions are divided into two categories: personal exemptions and dependent exemptions. Each tax exemption is worth $3,950 for Tax Year 2014. 

How Many Tax Exemptions Can I Claim?

Generally, you can claim one personal tax exemption for yourself and one for your spouse if you are married. Your spouse is never considered your dependent.

You can also claim one tax exemption for each person who qualifies as your dependent.

You cannot claim any exemptions if another taxpayer is entitled to claim you as a dependent. In this case, they get the exemption for you, and you are not allowed to claim any dependents.

2014 Federal Income Tax Exemption Table

The following tax exemption table shows how much will be deducted from your gross income, based on your number of exemptions:

1.-------------$3,950

2.-------------$7,900

3.-------------$11,850

4.-------------$15,800

5.-------------$19,750

6.-------------$23,700

7.-------------$27,650

8.-------------$31,600

9.-------------$35,550

10.-----------$39,500

You may generally claim one tax exemption for yourself if you are a single taxpayer.What Are Personal Tax Exemptions?

If you are married and file a joint return, you may claim one tax exemption for yourself and one for your spouse. If you file a separate return, you are only able to claim a tax exemption for your spouse if your spouse is not filing a tax return, has no gross income, and was not claimed as the dependent of another taxpayer.

You must be married on the last day of the year to claim a tax exemption for your spouse on your tax return, and if you obtain a final divorce or separation decree by December 31st, you may not claim a federal tax exemption for your (ex) spouse. If your spouse dies during the tax year, you can still claim a tax exemption for them for the year.

What Are Tax Exemptions for Dependents?

You may claim a tax exemption for each dependent if all of the following statements are true:

1. You (or your spouse if filing jointly) do not qualify to be claimed as a dependent on another person's tax return.
2. The potential dependent is not Married Filing Jointly, unless the joint return is only a claim for a refund and there would be no taxes owed by either spouse if their returns were filed separately.
3. The potential dependent is a United States citizen, U.S. national, resident alien, or resident of Canada or Mexico (unless they are a legally adopted child).
4. The potential dependent is your Qualifying Child or your Qualifying Relative.

Find out how to claim a dependent.

Is There a Reduction of Tax Exemptions - A Tax Exemption Phase Out?

The personal exemption begins to phase out with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly). It phases out completes at $376,700 ($427,550 for married couples filing jointly).

How Do I Claim Tax Exemptions?

You can claim personal tax exemptions on Form 1040EZ, 1040A, or 1040(Not sure which form to use? Find outwhich Form 1040 to file). You can only claim tax exemptions for dependents on Form 1040A efile it and Form 1040.

It is easy to claim all of the tax exemptions you deserve when you prepare your tax return on efile.com. The online software will choose the correct number of exemptions for you based on your answers to some simple questions.

More about Tax Exemptions

For more information on exemptions, dependents, qualifying children, and qualifying relatives, see Publication 501 -Exemptions, Standard Deduction, and Filing Information.

Exemptions aren't the only way to pay less taxes. See what tax deductions you may qualify for.