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Tax Exemptions

Tax exemptions are used to reduce your taxable income and you can usually claim exemptions for yourself, your spouse and each person you can legally claim as a dependent. There are two types of exemptions, one being for personal exemptions and the other for exemptions regarding dependents. Each exemption is worth roughly $3,500 however different rules apply to each type.

Note that if you claim an exemption for a dependent, that dependent cannot turn around a claim a personal exemption on their own tax return. You may however be able to claim a $500 exemption if you provided housing relief to any person displaced by flooding, hurricanes, tornadoes or storms in the Midwestern area of the states.

Claiming exemptions varies from form to form. For instance, if you file a 1040EZ, the exemption amount is simply combined with the standard deduction but if you file either a 1040 or 1040A there are a few more steps involved and if you're doing your own returns, you will want to check your math more than once just to be sure there are no errors on your end.

As a U.S. citizen, U.S. resident alien, U.S. national or a resident of Mexico or Canada, you may also qualify for an exemption. If you happen to be a non resident alien (other than a resident from Mexico or Canada) you qualify for only one personal exemption which means you cannot claim exemptions for spouses or dependents. However, these restrictions do not apply if a non resident alien is married to a U.S. citizen. Remember, your spouse is never considered your dependent.

To simplify, a personal exemption is one where you can claim one exemption for yourself and if you're married, one for your spouse. Now if someone else has the right to claim you as a dependent, even if they don't actually do so, you cannot take an exemption for yourself.

If you and your spouse decide to file a joint return, each can claim one exemption whereas if you file a separate return, you can only claim an exemption for your spouse if they had no gross income, are not filing a return and were not the dependent of another taxpayer.

For a complete list of the rules, regulations and standards for tax exemptions visit www.irs.gov/publications.

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