What You Need to Know About Tax Exemptions by Joanie B. Stein, CPA

Posted on March 14, 2017 by Joanie Stein

As the 2016 income tax filing deadline nears, taxpayer will be looking for ways to reduce their taxable income. In addition to deductions for making contributions to retirement accounts and charities, prepaying property taxes or harvesting investment losses to offset capital gains, certain taxpayers may claim exemptions and deduct from their taxable income $4,050 for themselves and each of their dependent children.

Personal Exemptions. Taxpayers are allowed one personal exemption for themselves, unless they may be claimed as a dependent on another individual’s tax return, even when that individual does not actually exercise the claim. A married taxpayer may claim one exemption for him or herself and one for his or her spouse only when filing a joint tax return. When married taxpayers file separate returns, an exemption for a spouse may be claimed only when that spouse has no gross income, is not filing a tax return and does not qualify to be claimed as a dependent on another individual’s tax return. This is true for spouses who are considered for tax purposes as U.S. nonresident aliens.

Dependent Exemptions. The tax code allows individual taxpayers to claim an exemption for each “qualifying dependent,” which includes a child who meets the following criteria:

  1. Is a child, step child, foster child, brother, sister, step-brother, step-sister or descendent of the taxpayer
  2. Is at the end of the year either under the age of 19, a student under the age of 24, or an individual of any age if he or she is permanently disabled.
  3. Has lived with the taxpayer for longer than half of the year
  4. Has not provided more than half of his or her own support for the year
  5. Is not filing a joint tax return (unless doing so to claim a refund of withheld income tax or estimated taxes already paid)

Special rules will apply for children of parents who are separated or divorced.

Dependent exemptions are also available for taxpayers who have a qualifying dependent relative who has less than $4,050 in gross income for the year and receives more than have of his or her annual support from the taxpayer. The qualifying dependent must be related to the taxpayer, but he or she need not live with taxpayer during any portion of the year.

As is the case with many tax benefits, tax exemptions begin to phase out when taxpayers adjusted gross income (AGI) exceeds certain thresholds. For single filers, the exemption is reduced once AGI reaches $259,400, for married couples filing jointly, the dollar amount of the exemptions is reduced by 2% for each $2,500 that one’s AGI exceeds $311,300.

About the Author: Joanie B. Stein, CPA, is a senior manager with Berkowitz Pollack Brant’s Tax Services practice, where she helps individuals and businesses implement sound tax-planning strategies. She can be reached at the CPA firm’s Miami office at (305) 379-7000 or at