When it comes to taxes, there are many terms that can be confusing and difficult to understand. One of these terms is the personal exemption, which often causes confusion among taxpayers. In this article, we will take a closer look at what you need to know about personal exemption for 2022.
What is Personal Exemption?
Personal exemption is a deduction that taxpayers can claim for themselves, their spouse, and their dependents. It reduces the amount of income that is subject to federal income tax. In other words, it reduces your taxable income, which means that you will owe less tax.
How Does Personal Exemption Work?
Personal exemption is deducted from your gross income before calculating your taxable income. In 2022, the personal exemption amount is $4,050 per individual. For example, if you are married and have two children, you can claim a total of four personal exemptions, which results in a total deduction of $16,200.
Who Can Claim Personal Exemption?
As mentioned earlier, taxpayers can claim personal exemption for themselves, their spouse, and their dependents. A dependent is typically a child or a relative who relies on you for financial support. However, there are certain requirements that must be met in order to claim a dependent. For example, the dependent must be a U.S. citizen, resident alien, or a resident of Canada or Mexico. They must also not file a joint return with a spouse, and they must meet certain income requirements.
What’s New for 2022?
There are no changes to the personal exemption amount for 2022. However, it’s important to note that the personal exemption is not available for tax years 2018 through 2025. This is due to the Tax Cuts and Jobs Act, which suspended the personal exemption in favor of an increased standard deduction. For tax year 2026 and beyond, the personal exemption is set to return.
Conclusion
In summary, personal exemption is a deduction that can help reduce your taxable income. It’s available for yourself, your spouse, and your dependents. While it’s no longer available for tax years 2018 through 2025, it still remains an important tax concept to understand. Knowing what you’re entitled to can help you maximize your deductions and reduce your tax liability.
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