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How Exemptions and Dependents Can Reduce Taxable Income

For the 2017 tax year, most taxpayers can claim an exemption for themselves and reduce their taxable income on their 2017 tax return. You may also be able to claim an exemption for each of your dependents. Each exemption normally allows you to deduct $4,050 on your tax return. Here are seven key points to keep in mind on dependents and exemptions:

  1. Personal Exemptions. You can usually claim exemptions for yourself and your spouse on a jointly filed tax return. For married taxpayers filing separate returns, an exemption can only be claimed for a spouse if that spouse:
  • Had no gross income,
  • Is not filing a tax return, and
  • Was not the dependent of another taxpayer.
  1. Exemptions for Dependents.  A dependent is either a child or a relative who meets a set of requirements. You can normally claim dependents as exemptions. You must list a Social Security number for each dependent.
  2. No Exemption on Dependent’s Return. If you can claim a person as a dependent, then that dependent cannot claim a personal exemption on his or her own tax return. Please note that if the dependent is eligible to be claimed as a dependent and is not claimed, the dependent cannot claim a personal exemption for him/herself on their own personal return.
  3. Dependents May Have to File. A dependent may have to file a tax return. This depends on certain factors like total income, whether they are married, and if they owe certain taxes.
  4. Exemption Phase-Out. Taxpayers earning above a certain amount will lose part or all of the $4,050 exemption.

Due to the new Tax Cuts and Job Acts passed by President Trump, the rules for exemptions and dependents will change starting with your 2018 tax returns. For more information on exemptions and dependents for the 2017 tax year, always consult a Certified Public Accountant.

Submitted by: Dennis Gallant, CPA, Senior Manager, Tax Services, Thomas Howell Ferguson P.A. CPAs, dgallant@thf-cpa.com, (850) 668-8100.


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