Client Question: What is the difference between a Dependent and an Exemption?
While every individual tax return is different, some tax rules affect every person who files a federal income tax return. These rules include dependents and exemptions. Below are some simple facts about dependents and exemptions that will help you determine the difference between them:
1. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,700 on your 2011 tax return.
2. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you are filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.
3. Exemptions for dependents. You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. You must list the Social Security number of any dependent for whom you claim an exemption.
4. If someone else claims you as a dependent, you may still be required to file your own tax return. Whether you must file a return depends on several factors including the amount of your unearned, earned or gross income, your marital status and any special taxes you owe.
5. If you are a dependent, you may not claim an exemption. If someone else, such as your parent or legal guardian, claims you as a dependent, you may not claim your personal exemption on your own tax return.
6. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children.
You can see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information for additional tests to determine who can be claimed as a dependent. For more information on exemptions, dependents and whether you or your dependent needs to file a tax return, please give us a call.