Personal Exemptions and Dependents

Exemption amount for each person that you claim on your tax return was $3,300 in 2006 and $3,400 in 2007, and continues to go up each year.

There are two types of exemptions: personal exemptions and exemptions for dependents. Each exemption is the same amount $3,400 in 2007 - different rules apply to each type.

You are generally allowed one exemption for yourself and if you are married, one exemption for your spouse. These are called personal exemptions. (You can not take an exemption for yourself if you can be claimed on another taxpayer's tax return)

Your spouse is NEVER considered as a dependent.

Exemptions for Dependents - The term "dependent" means:

* A qualifying child
* A qualifying relative

There are three test to determine if a person can be a qualifying child or a qualifying relative.

1. dependent taxpayer test
2. joint return test
3. citizen or resident test

If you have housekeepers, maids or servants working for you, you CANNOT claim exemptions for them.

And to get a child tax credit, the child MUST be UNDER 17 at the end of the year. Child tax credit is not to be confused with the earned income credit which is discussed in another blog posting.

You can't claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns.

You can't claim a person as a dependent unless that person is a US citizen, US resident alien, US national or a resident of Canada or Mexico, for some part of the year.

You can't claim a person as a dependent unless that person is your QUALIFYING CHILD OR QUALIFYING RELATIVE.

There are 5 test to be meet before a child can be considered a qualifying child

1. relationship
2. age
3. residence
4. support
5. special test for qualifying child of more than one person.