What is an exemption?

The IRS defines an exemption as the amount you can claim to help reduce your taxable income. Basically, there are two types of exemptions: personal and dependent. You claim yourself, your spouse if you file a joint return, your children, and other relatives you support. There's no limit, but all dependents have to qualify according to IRS (I-R-S) rules, and exemptions have been phased out for high-income people. Exemptions should not be confused with the standard deduction, an amount by which you can reduce your taxable income if you decide against itemizing. Lower standard deductions are allowed for dependents with only investment income. These tips are provided to give you general information about your taxes. If you have specific questions, please consult a tax advisor or call the toll-free number for Federal Tax Information and Assistance at 1-800-829-1040.