Question

What does the Internal Revenue Code state about the personal and dependency exemption amounts?

Answer 1

Under United States tax law, a personal exemption is an amount that a resident taxpayer is entitled to claim as a tax deduction against personal income in calculating taxable income and consequently federal income tax.

The exemption is composed of personal exemptions for the individual taxpayer and, as appropriate, the taxpayer's spouse and dependents, as provided in Internal Revenue Code.

Section 152 of the code contains nuanced requirements that must be met before a taxpayer can claim another as a dependent for personal exemption purposes. The general rule is that a personal exemption may be taken for a dependent that is either a qualifying child or a qualifying relative.

However, there are several exceptions to this rule.

Taxpayers who are claimed as dependents of others cannot themselves claim personal exemptions for their qualifying dependents. Married individuals who file joint returns cannot also be claimed as dependents of another taxpayer. Non-U.S.-Citizens or nationals of other countries cannot be claimed as dependents unless they also reside in the U.S. or in contiguous countries. However, taxpayers who are also U.S. citizens or nationals may claim as a dependent any child who shares the taxpayer's abode and is a member of the taxpayer's household.

Qualifying children as dependents

Qualifying children must first be "children". The qualifying children must have the same principal place of abode as the taxpayer for more than one-half of the year and must not have provided more than one-half of their own support. They may not have reached the age of 19 by the close of the year, unless they are students, in which case they must not have reached the age of 24, or unless they are permanently and totally disabled.

Achild cannot qualify as a dependent on more than one tax return, so the code has a set of rules to prevent this from happening. If more than one parent attempts to claim the child and they do not file a joint return, the code first attempts to break the tie in favor of the parent with whom the child resided longest during the taxable year. If that does not break the tie, the parent with the highest adjusted gross income wins the right to claim the child as a dependent.

Other qualifying relatives as dependents

A qualifying relative cannot be the qualifying child of any taxpayer. The individual must have gross income less than the amount of the personal exemption.The taxpayer must have provided over one-half of the individual's support.

The allowable relationships between the taxpayer and the qualifying relative are almost innumerable, but under no circumstances can the relationship be one that violates local law.