Wiley Tax Preparer: A Guide to Form 1040

CHAPTER 3

Personal and Dependency Exemptions

Personal and dependency exemptions reduce the amount of income subject to tax. Individuals are allowed to claim one exemption for themselves, their spouse, and any dependents claimed on the return. Each personal and dependency exemption is worth the same deduction amount. For 2012, each exemption is worth $3,800. While the exemption amount is the same, the rules for when an exemption can be claimed are different for personal and dependency exemptions.

Personal Exemptions

Each taxpayer, other than someone who can be claimed as a dependent of another taxpayer, is entitled to claim a personal exemption.

Joint Returns

When a married couple files a joint return, they can claim a total of two personal exemptions on their joint return (one exemption for each spouse).

Separate Returns

If a married couple files separately (as explained in Chapter 2), each spouse generally can claim only their own personal exemption on their own separate return. An exception allows one spouse to claim a personal exemption for the other spouse on a separate return but only if:

• The spouse has no income, AND
• The spouse is not filing a return, AND
• The spouse cannot be claimed as another taxpayer's dependent.

Example

A young wife files a separate return. Her husband, a student without any income, can be claimed as a dependent by his parents. The wife can claim her own exemption on her return, but she cannot claim an exemption for her husband because he can be ...