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Personal Exemptions and Dependents

 

 

Exemptions

There are two types of exemptions: personal exemptions and exemptions for dependents. While these are both worth the same amount, different rules apply to each type.

Personal Exemptions

Your Own Exemption - You can take one exemption for yourself unless you can be claimed as a dependent by another taxpayer.

Your Spouse's Exemption - Your spouse is never considered your dependent. You may be able to take one exemption for your spouse only because you are married.

Exemptions for Dependents

You are allowed one exemption for each person you can claim as a dependent. You can only claim an exemption for a person if all five of the exemption tests are met. You can take an exemption for your dependent even if your dependent files a return. But that dependent cannot claim his or her own personal exemption if you are entitled to do so. However, see Joint Return Test, later in this lesson.

Exemption tests - The following five tests must be met for you to claim an exemption for a dependent:

  1. Member of Household or Relationship Test - To meet this test, a person must live with you for the entire year as a member of your household or be related to you. Your spouse cannot be your dependent. However, you can claim his or her exemption as a Personal Exemption.
  1. Citizenship Test - To meet the citizenship test, a person must be a U.S. citizen or resident, or a resident of Canada or Mexico, for some part of the calendar year in which your tax year begins.

  1. Joint Return Test - Even if the other exemption tests are met, you are generally not allowed an exemption for your dependent if he or she files a joint return.

Example - You supported your daughter for the entire year while her husband was in the Armed Forces. The couple files a joint return. Even though all the other tests are met, you cannot take an exemption for your daughter.

  1. Gross Income Test - Generally, you cannot take an exemption for a dependent if that person had gross income of $2,650 or more for the year. This test does not apply if the person is your child and is either under age 19, or a student under age 24, as discussed later.
  1. Support Test - You must provide more than half of a person's total support during the calendar year to meet the support test. You figure whether you have provided more than half by comparing the amount you contributed to the person's support with the entire amount of support the person received from all sources. This amount includes the person's own funds used for support. A person's own funds are not support unless they are actually spent for support.

Example - Your mother received $2,400 in social security benefits and $300 in interest. She paid $2,000 for lodging and $400 for recreation. Even though your mother received a total of $2,700, she spent only $2,400 for her own support. If you spent more than $2,400 for her support and no other support was received, you have provided more than half of her support.

Example 1 - You provide $4,000 toward your mother's support during the year. She has earned income of $600, nontaxable social security benefit payments of $4,800, and tax-exempt interest of $200. She uses all these for her support. You cannot claim an exemption for your mother because the $4,000 you provide is not more than half of her total support of $9,600.

Example 2 - Your daughter takes out a student loan of $2,500 and uses it to pay her college tuition. She is personally responsible for the loan. You provide $2,000 toward her total support. You cannot claim an exemption for your daughter because you provide less than half of her support.

Total Support - To figure if you provided more than half of the support of a person, you must first determine the total support provided for that person. Total support includes amounts spent to provide food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. Expenses that are not directly related to any one member of a household, such as the cost of food for the household, must be divided among the members of the household. For lodging, the amount of support is the fair rental value of the lodging.

Example - Your parents live with you, your spouse, and your two children in a house you own. The fair rental value of your parents' share of lodging is $2,000 a year, which includes furnishings and utilities. Your father receives a nontaxable pension of $4,200, which he spends equally between your mother and himself for items of support such as clothing, transportation, and recreation. Your total food expense for the household is $6,000. Your heat and utility bills amount to $1,200. Your mother has hospital and medical expenses of $600, which you pay during the year. Figure your parents' total support as follows: You must apply the support test separately to each parent. You provide $2,000 ($1,000 lodging, $1,000 food) of your father's total support of $4,100 less than half. You provide $2,600 to your mother ($1,000 lodging, $1,000 food, $600 medical) more than half of her total support of $4,700. You meet the support test for your mother, but not your father. Heat and utility costs are included in the fair rental value of the lodging, so these are not considered separately.

Multiple Support Agreement - Sometimes no one provides more than half of the support of a person. Instead, two or more persons, each of whom would be able to take the exemption but for the support test, together provide more than half of the person's support. When this happens, you can agree that any one of you who individually provides more than 10% of the person's support, but only one, can claim an exemption for that person. Each of the others must sign a written statement agreeing not to claim the exemption for that year. The statements must be filed with the income tax return of the person who claims the exemption. Form 2120, Multiple Support Declaration, is used for this purpose.

Example 1 - You, your sister, and your two brothers provide the entire support of your mother for the year. You provide 45%, your sister 35%, and your two brothers each provide 10%. Either you or your sister can claim an exemption for your mother. The other must sign a Form 2120 or a written statement agreeing not to take an exemption for her. Because neither brother provides more than 10% of the support, neither can take the exemption. They do not have to sign a Form 2120 or the written statement.

Support Test for Divorced or Separated Parents - The support test for a child of divorced or separated parents is based on special rules that apply only if:

Custody - Custody is usually deter mined by the terms of the most recent decree of divorce or separate maintenance, or a later custody decree. If there is no decree, use the written separation agreement. If neither a decree nor agreement establishes custody, then the parent who has the physical custody of the child for the greater part of the year is considered to have custody of the child.

Noncustodial parent - The noncustodial parent will be treated as providing more than half of the child's support if:

Written declaration - The custodial parent should use Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents, or a similar statement, to make the written declaration to release the exemption to the noncustodial parent. The noncustodial parent must attach the form or statement to his or her tax return. The exemption can be released for a single year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. If the exemption is released for more than one year, the original release must be attached to the return of the noncustodial parent for the first year of such release, and a copy of the release must be attached to the return for each succeeding taxable year for which the noncustodial parent claims the exemption.

Phaseout of Exemptions - The amount you can claim as a deduction for exemptions is phased out once your adjusted gross income (AGI) goes above a certain level for your filing status.

These levels are as follows:

Filing Status

AGI Level Which Reduces Exemption Amount

Married filing separately

$ 90,900

Single

121,200

Head of household

151,500

Married filing jointly

181,800

Qualifying widow(er)

181,800

You must reduce the dollar amount of your exemptions by 2% for each $2,500, or part of $2,500 ($1,250 if you are married filing separately), that your AGI exceeds the amount shown for your filing status. If your AGI exceeds the amounts shown by more than $122,500 ($61,250 if married filing separately), the amount of your deduction for exemptions is reduced to zero.

 

 

Social Security Number for Dependents - You must list the social security number (SSN) of any person for whom you claim an exemption. If your child was born and died in 1997 and you do not have an SSN for the child, you may attach a copy of the child's birth certificate instead. If you do, enter "DIED" in column 2 of line 6c of your Form 1040 or Form 1040A.

Note - If your dependent does not have and is not eligible to get an SSN, you must list the individual taxpayer identification number (ITIN) or adoption taxpayer identification number (ATIN) instead of an SSN.

Dependents living in Mexico or Canada - If you claim an exemption for a dependent who lives in Mexico, enter "MX" instead of a number in column (4) of line 6c of your Form 1040 or Form 1040A. If you claim an exemption for a dependent who lives in Canada, enter "CN" instead of a number in column (4) of line 6c of your Form 1040 or Form 1040A.