The personal exemption is an important exemption that taxpayers can claim on their tax returns. It is a deduction allowed for each taxpayer and dependent, which helps to reduce the overall taxable income. Many people are unaware of what it is, how to claim it, and when it applies. In this article, we’ll explore what the personal exemption is and how it can affect your tax filing.
What is the Personal Exemption?
The Personal Exemption is a tax deduction that is allowed for each taxpayer and dependent. In 2017, the personal exemption amount was $4,050 per person, which means that taxpayers can claim $4,050 for themselves, their spouse, and each of their dependents. This amount is then subtracted from their taxable income, which helps to reduce the overall tax liability.
How to Claim the Personal Exemption?
To claim the Personal Exemption, taxpayers need to fill out the IRS Form 1040, which is the U.S. Individual Income Tax Return. In this form, taxpayers will be asked to provide their personal information, including their name, address, and Social Security number. They will also have to indicate the number of personal exemptions they are claiming, which includes themselves, their spouse, and their dependents.
When Does the Personal Exemption Apply?
The personal exemption applies as long as the taxpayer meets certain criteria. To claim the personal exemption, taxpayers must be:
1. A U.S. citizen, resident alien, or a non-resident alien who is filing a joint return with a U.S. citizen or resident alien spouse.
2. Not claimed as a dependent on someone else’s tax return.
3. Not filing a separate return if they are married.
It’s important to note that the personal exemption was suspended for tax years 2018 through 2025 due to changes made by the Tax Cuts and Jobs Act (TCIA).
Effect of Personal Exemption on Tax Liability
Claiming the personal exemption can have a significant impact on the taxpayer’s tax liability. For example, if a taxpayer is filing as head of household and has two dependents, they would be able to claim three personal exemptions for a total of $12,150. This amount would be subtracted from their taxable income, reducing their overall tax liability.
Conclusion
The personal exemption is an important tax deduction that can help taxpayers reduce their overall tax liability. It is a deduction allowed for each taxpayer and dependent, which can have a significant impact on the taxpayer’s tax filing. However, it’s important to note that the personal exemption was suspended for tax years 2018 through 2025 due to changes made by the TCIA. Understanding the personal exemption and how it affects your tax filing can go a long way in maximizing your tax savings and staying compliant with the IRS.
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