Personal Exemptions

You can reduce your taxes with personal exemptions

Father kissing sons at breakfast table.
Personal exemptions are available for each taxpayer and dependent shown on the tax return. © Mike Kemp / Getty Images

Personal exemptions act just like a tax deduction. Personal exemptions reduce one's taxable income, which in turn lowers the income tax.

Who is Eligible

An individual can claim one personal exemption for oneself plus one exemption for each person claim as a dependent

Married people who file jointly can claim two personal exemptions (one for each spouse), plus exemptions for each of their dependents.

If filing separately, one spouse can claim the other spouse's personal exemption only in limited circumstances.

Dependents cannot claim their own personal exemption.

How Much is the Personal Exemption

The personal exemption amount is indexed annually for inflation. For tax year 2016, the personal exemption amount is $4,050. 

Personal Exemptions
YearAmount
2016$4,050
2015$4,000
2014$3,950
2013$3,900
2012$3,800
2011$3,700
2010$3,650
2009$3,650
2008$3,500
2007$3,400
2006$3,300
2005$3,200
2004$3,100
2003$3,050
2002$3,000
2001$2,900
2000$2,800
1999$2,750

 

Personal Exemption Amount Reduced Based on Income

Personal exemptions are subject to phase-out limits, called the personal exemption phaseout (or PEP).

The personal exemption phases out, or gradually reduces, by 2% for each $2,500 (or fractional portion of $2,500) by which a person's adjusted gross income for the year exceeds a threshold amount. For people who use the married filing separately status, the personal exemption phases out by 2 percent for each $1,250 of adjusted gross income over the threshold.

 

Phaseout Range for Personal Exemptions for 2016
Filing StatusPhaseout BeginsPhaseout Ends
Married Filing Jointly$311,300$433,800
Qualifying Widow(er)311,300433,800
Head of Household285,350407,850
Single259,400381,900
Married Filing Separately155,650216,900
(Source: IRS, Revenue Procedure 2015-53, pdf)

 

Phaseout Range for Personal Exemptions for 2015
Filing StatusPhaseout BeginsPhaseout Ends
Married Filing Jointly$309,900$432,400
Qualifying Widow(er)309,900432,400
Head of Household284,050406,550
Single258,250380,750
Married Filing Separately154,950216,200
(Source: IRS, Revenue Procedure 2014-61, pdf)

 

For example: Darla has adjusted gross income of $300,000 in 2016. She files as head of household and claims two personal exemptions: one for herself plus one for her daughter. The relevant threshold for 2016 is $285,350 for head of household filers. Darla's adjusted gross income of $300,000 exceeds the threshold of $285,350 by $14,650. We take this excess amount and divide by $2,500, which is 5.86. We reduce her personal exemptions by two percent for each $2,500 or fractional part of $2,500, which would be six reductions of 2% (five whole multiplies of $2,500 plus one fractional part of $2,500). Darla reduces her personal exemptions by 12%. For 2016, Darla's personal exemptions are reduced by ($4,050 + $4,050) x 12%, or $972. So Darla's two personal exemptions (which total $8,100 before the reduction) are worth only $7,128 after the phase-out limit.

The reduction in personal exemptions can be calculated using Worksheet 3 in Publication 501.

The phase-out limits did not apply for the years 2010, 2011 or 2012. The limitations on personal exemptions are in effect for 2013 and later years.

How to Claim Personal Exemptions

Personal exemptions show up two places on the tax return.

First place personal exemptions appear is on the first page of the tax return.

Line 6 of Form 1040 has space to indicate whether a person is claiming personal exemptions for oneself, for one's spouse, and for one's dependents.

Secondly, the deductible amount of personal exemptions shows up on the second page (Form 1040 Line 42 and Form 1040A Line 26).

For people who file Form 1040EZ, personal exemptions show up in just one place: Line 5.

Effect on the Alternative Minimum Tax

Personal exemptions reduce the federal income tax only. Personal exemptions do not reduce the alternative minimum tax (AMT). That's because taxable income for AMT purposes is calculated without regard to personal exemptions.

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