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What are deductions for personal exemptions?
Each person is allowed a deduction for personal exemption. This amount
is $3,650 in 2009 adjusted for inflation (in 2008, the exemption is
worth $3,500). What this means is that if a person has $3,650 of
taxable income (less deductions), she or he pays no tax.
In addition, a taxpayer is allowed an additional personal exemption for
each dependent. A dependent is a person with certain specified
relationships to the taxpayer and with more than half of whose support
is provided by the taxpayer. Children cease to be dependents, even if
supported by a parent or parents, in the year in which they attain age
19, or in the year in which they attain age 24 if they are full-time
students for at least 5 months during the taxable year. The definitions
of "support" and "full-time" result in many disputes and persons
claiming these exemptions should consult with a tax adviser.
There are rules dealing with a dependent who is supported by several
taxpayers. Essentially, any person paying at least 10% of the support
can claim the exemption if all other 10% or more payers agree (and none
of them paid more than 50% of the support) and have the appropriate
relationship to the claimed dependent.
The personal exemptions are, like many other tax benefits, phased out
for taxpayers with substantial taxable incomes. The phase-out begins at
$250,000 in 2009 indexed for inflation for persons filing joint returns
and a lower amount for all other taxpayers. (For 2008, the phase out
begins at $239,950). There is no phase-out of exemption after 2009.
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