5. Tax Exemptions
An exemption is a certain amount of money on which we do not have to pay income tax. In 2008, the government exempted the first $3,500 worth of income from being taxed. An exemption is per person. If you file with your spouse, married filing jointly, your joint tax return would have two exemptions: one for you and one for your spouse. In that situation, the first $7,000 worth of income is not subject to tax. If you and your spouse have a dependent child, then your tax return would have three exemptions for a total of $10,500. The exemption amount is subtracted from our adjusted gross income. The income tax we owe is based upon what our adjusted gross income is minus our exemptions and deductions.
As noted above, you may take an exemption for your dependents. To be dependents of yours, you must provide more than 50 percent of their support. Usually, your dependents are your school-aged children. Sometimes, if your mom lives with you and you provide more than half of her support – the money she lives on during the year – you may be able to claim her as a dependent. If she is your dependent, you would have another exemption. However, she would not be able to claim herself if she filed a tax return. This is the government’s way of helping you to take care of the people who depend on you.
Supporting family members outside the U.S.
Even though some individuals and families use a significant amount of their income to provide support to relatives in other countries, that support is not eligible for a tax exemption. Tax exemptions are a way for the government to help us take care of our relatives who are United States citizens.