Generally, you are allowed one exemption for yourself, and if you are married, one exemption for your spouse. These are called personal exemptions, which reduce your taxable income. There are several exceptions to this general statement.
Single Persons
If another taxpayer is entitled to claim you as a dependent, you cannot take an exemption for yourself. This is true even if the other taxpayer does not actually claim your exemption.
Married Persons
Your spouse is never considered your dependent. You may be able to take one exemption for your spouse only because you are married.
Joint Returns
On a joint return, you can claim one exemption for yourself and one for your spouse.
Separate Returns
If you are married and file a separate return, you may claim an exemption for your spouse if your spouse had no gross income for the calendar year and your spouse is not the dependent of another taxpayer. This is true even if the other taxpayer does not actually claim your exemption. This is also true if your spouse is a nonresident alien.
Death of Spouse
If your spouse died during the year, you can generally claim your spouses exemption if you could otherwise. If you remarried during the year, you cannot take an exemption for your deceased spouse.
Divorced or Separated Spouse
If you obtained a final decree of divorce or separate maintenance by the end of the year, you cannot take your former spouse’s exemption. This applies even if you provided all of your former spouse’s support.
You are allowed one exemption for each person you can claim as a dependent. You can 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.
The following five tests must be met for you to claim an exemption for a dependent:
Member of Household or Relationship Test
A person must live with you for the entire year as a member of your household or be related to you in one of the ways listed under Relatives not living with you (IRS Publication 17, Your Federal Income Tax). Examples include your child, stepchild, brother, parents, etc.
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.
Joint Return Test
Even if the other exemption tests are met, you are generally not allowed an exemption for a dependent if he or she filed a joint return with another person. This test does not apply if a joint return was filed by the dependent and his or her spouse merely as a claim for a refund and no tax liability would exist for either spouse on separate returns.
Gross Income Test
Generally, you cannot take an exemption for a dependent if that person had gross income of $3,800 for 2012 and $3,900 for 2013. This test does not apply if that person is your child and is either under age 19 or a student under age 24.
Support Test
You must provide more than half of a person’s total support during the calendar year to meet the support test. You can 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 received from all sources. This includes support the person provided from his or her own funds.
The amount you can claim for your personal exemption for 2012 is $3,800 and $3,900 for 2013. Refer to the Form 1040A or 1040 instructions for further details. For more details on personal exemptions and dependents, please refer to IRS Publication 17 or their website at www.irs.gov. For more information contact Henssler Financial at 770-429-9166 or experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
