By Gary DellaPosta, CPA
Some tax rules affect everyone who files a federal income tax return. With that in mind, here are seven facts about dependents and exemptions that taxpayers should know about.
1. Exemptions lower your income. There are two types of exemptions: personal exemptions and exemptions for dependents. You can usually deduct $4,050 for each exemption you claim on your tax return.
2. Personal exemptions. You can usually claim an exemption for yourself. If you're married and file a joint return you can also claim one for your spouse. If you file a separate return, you can claim an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer.
3. Exemptions for dependents. You can usually claim an exemption for each of your dependents. A dependent is either your child or a relative that meets certain tests. You can't claim your spouse as a dependent. In addition, you must list the Social Security number of each dependent you claim. If you don't have a social security number, special rules apply.
4. Some people don't qualify. You generally may not claim married persons as dependents if they file a joint return with their spouse. Again, there are some exceptions to this rule, so please call your accountant if you have questions.
5. Dependents may have to file. People that you can claim as your dependent may have to file their own federal tax return. This depends on many things, including the amount of their income, their marital status and if they owe certain taxes.
6. No exemption on dependent's return. If you can claim a person as a dependent, that person can't claim a personal exemption on his or her own tax return. This is true even if you don't actually claim that person as a dependent on your tax return. The rule applies because you have the right to claim that person.
7. Exemption phase-out. The $4,050 per exemption is subject to income limits. This rule may reduce or eliminate the amount depending on your income. Please call if you need additional information about the exemption phase-out.
Gary DellaPosta is a CPA and owns his own firm on Cape Cod. A graduate of Bryant University, he is a member of the American Institute of CPA's as well as the Massachusetts Society of CPA's. In addition to providing accounting, tax and advisory services to individuals and businesses, he also provides litigation support to attorneys and has been recognized as an expert in numerous Massachusetts' courts. Mr. DellaPosta serves on the Board of the Barnstable County Mutual Insurance Co., where he serves on the audit, investment and employee benefit committees. He is a Director at The Cooperative Bank of Cape Cod, where he serves on audit, governance, and personnel committees, and chairman of the Audit Committee at the Falmouth service Center. He is also a former director of Eastern Bank and Plymouth Savings Bank, the former Treasurer of the Community Health Center of Cape Cod and is a former trustee of Heritage Museum & Gardens.
Cape Cod Moms