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Video: What Are Tax Exemptions?

Updated for Tax Year 2015


OVERVIEW

Tax exemptions work like a deduction and reduce your taxable income each year. Learn about tax exemptions with help from TurboTax in this video clip.


Video transcript:

Hello, I'm Jeremy from TurboTax with some information about claiming exemptions on your income tax return.

When you fill out your federal income tax return each year, you've probably noticed that you can claim an exemption for yourself and for each of your dependents. These exemptions work just like a deduction in that they reduce your taxable income which ultimately reduces the amount of tax you must pay.

But unlike your other deductions that may vary in dollar amount each year, the government determines the amount you can claim for an exemption and it is not subject to any change based on your personal circumstances. Essentially it's all or nothing. Although you don't calculate the exemption amount, you do have to ensure that you meet the requirements to claim each one.

When it comes to claiming dependents, there are certain tests you must satisfy.

  • To claim your children, they must live with you for more than half the tax year, must not provide more than half of their own support and be under the age of 19 or under the age of 24 if a full time student.
  • But your children are not the only ones who can qualify as your dependent. You can claim virtually anyone if you provide that person with significant financial support and satisfy other IRS requirements.

And don't forget your own exemption. As long as no other tax payer can claim you as their dependent, then go ahead and claim one for yourself. TurboTax will guide you through claiming exemptions. All you need to do is answer some basic questions about your dependents, and we'll do the rest.

For more tax tips and guidance, visit www.turbotax.com.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


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