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The Hows of Taxes

Module 6: Exemptions

 

Parents with two children.
An exemption is a dollar amount that can be deducted from an individual’s total income, thereby reducing the taxable income. Taxpayers may be able to claim two kinds of exemptions:
  • Personal exemptions generally allow taxpayers to claim themselves (and possibly their spouse)
  • Dependency exemptions allow taxpayers to claim qualifying dependents (covered in Module 4)
The deduction for personal exemptions is suspended (reduced to $0) for tax years 2018 through 2025 by the Tax Cuts and Jobs Act. Although the exemption amount is zero, the ability to claim an exemption may make taxpayers eligible for other tax benefits. Only one exemption can be claimed per person. An exemption for a particular person cannot be claimed on more than one tax return.

materials:

Tax Tutorial
Tax Tutorial: ExemptionsDiscover the two types of exemptions and how exemptions affect income that is subject to tax.
Simulation
Simulation 6: Identifying Filing Status, Dependents, and ExemptionsAnswer a series of questions about Alicia Garcia. Then, see how your responses are reported in the label, filing status, and exemption sections of the tax return for Alicia Garcia.
Fact Sheet
Fact Sheet: ExemptionsPrint this fact sheet on exemptions.
Assessment
Assessment: ExemptionsReview your understanding of exemptions.
skill check:
Check your understanding of exemptions and how they affect taxable income. Indicate whether each of the statements below is true or false by clicking on the correct answer. To assess your answers, click the Check My Answers button at the bottom of the page.
  1. There are two types of exemptions.
  • A.
  • B.
  1. A taxpayer can be claimed as a dependent on his parents' return and also claim a personal exemption on his own tax return.
  • A.
  • B.
  1. Personal exemptions are for parents and children, and dependency exemptions are for other blood relatives.
  • A.
  • B.
  1. Each exemption reduces the income that is subject to tax by the exemption amount.
  • A.
  • B.


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