Personal Tax Exemption

Every person who files a tax return is entitled to one personal tax exemption. The exemption should reduce a person’s tax burden and help them qualify for a tax refund.

The only time you can claim a personal tax exemption is if a person claims you as a dependant. Generally, a person who is over 19 years of age and not a fulltime student can not be claimed as dependant. There are some circumstances under which such a person can be claimed as dependent.

Nobody can claim their spouse as a dependant but a married couple can increase the amount of their tax exemption by filing a joint return. A couple must be living together to file a joint return and both spouse’s signatures must appear on the return.

Can Someone Else Claim Your Exemption?
There are some circumstances in which a person can claim another person’s tax exemption. When a person is listed as a dependent on somebody else’s return that person claims their exemption.

A person who is listed as a dependent can not file their own tax return. If a person claimed as a dependant files a tax return there is a good possibility the IRS will reject the tax returns of both individuals involved. It could also trigger an audit of both tax returns.

This is why full time students under 25 should check with their parents before filing a return. If the parents are claiming the student as a dependant the student shouldn’t file a tax return.

The big question facing most people when they fill out their tax return is what income is taxable and what income is not.

Generally any income received from employment in the form of salary or tips will be taxable. A person will have to report any income they made working from any job including temporary employment no matter short. If you work for just one day you will have to report it on your return.

In most cases you will receive a W-2 form for each job you work at. Something to remember is that an employer will report any income you make to the IRS.

Self Employment
If you make more than $400 from any non-work activity you are engaged in the IRS will consider you self employed. This means that you will have to report that money on your tax return and you could be required to pay some taxes on it.

Alimony and Child Support
Child support is not considered taxable income but alimony is. Any payment from a divorce agreement that is not child support will be considered alimony and taxable income by the IRS.

Welfare and Government Payments
Generally government assistance payments such as food stamps and welfare are not taxable. Unemployment insurance; however, is taxable and does have to be reported on your tax return. Social Security can be taxable so it will have to be reported on your tax return.

Something to remember is that reporting income on a tax return does not automatically mean you will have to pay taxes on it. Nor will reporting additional income always increase your tax liability.




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