Tax Deduction and Exemption Facts Everyone Needs to Know

Almost anybody can claim an exemption when they file a tax return. This lowers the amount of taxable income. Some of the top tax deduction and exemption facts that everyone should know include:

  • In addition to a personal exemption for yourself, an exemption is also allowed for each dependent, as long as certain qualifying factors are met. In order to claim someone as a dependent certain criterion must be met. You are almost never allowed to claim your spouse as your dependent. Any dependent claimed must have a valid social security number.
  • Choose to electronically file your taxes. E-file is the most effective way to ensure that you file a tax return that is accurate and complete. There are a number of software programs which can be used. These programs assist in determining the right exemptions for your tax return.
  • A dependent’s return cannot include a personal exemption for the dependent that you can claim. In other words, even if you choose not to claim the exemption for the dependent, he or she cannot claim their own personal exemption on their own tax return.
  • Tax exemptions cut the taxable income you have. There are generally two exemption types of exemptions. One is the personal exemption and the other is the dependent exemption. Each of these exemptions will deduct approximately $3,950 from your income on your tax return for 2014.
  • Typically a taxpayer is allowed one personal exemption for themselves. For those who file married, filing jointly, a personal exemption can also be claimed for your spouse. Anyone filing a married, filing separate, return may be able to claim a personal exemption for a spouse if the spouse did not have any gross income, if the spouse is not filing a tax return for 2014, and the spouse could not be claimed as a dependent on the tax return of another taxpayer.
  • In most cases a married individual cannot be claimed as a dependent if they are filing a joint 2014 tax return with their spouse. Some exceptions do apply, so professional tax assistance may be needed in some situations.
  • The 2014 exemption amount of $3,950 is subject to certain limits on income. IRS Publication 501 can provide further details. If your income amount is subject to the exemption phase out, the amount of the allowable exemption may be reduced or even eliminated.
  • The website offers a tool called the Interactive Tax Assistant which can help taxpayers determine if a person meets the qualifications of a dependent or not.

Anyone who can be claimed as a dependent on your tax return for 2014 may still have to file their own tax return. There are a number of determining factors which include the income amount of the dependent, the marital status of the dependent, and whether or not they owe certain types of taxes.

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