Tax Exemptions & Dependents for 2015 (2014 tax year)

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The IRS recently released a list of top facts about tax exemptions and dependents. Although there aren’t many updates, it is important that taxpayers are aware of the available options and don’t miss out on lowering taxes.

One way to lower your taxable income is through exemptions. Currently a personal exemption you can claim is $3,950 and additionally a taxpayer can claim the same amount for each of the dependents. Personal and dependent exemptions may get complicated once a tax return becomes less straightforward.
In case of personal exemptions, in most situations you are able to claim an exemption for yourself unless you are claimed as someone’s dependent. You can also claim a spouse as a dependent when filing taxes jointly and even separately, but in latter case your spouse would have to meet the following conditions:

  • Did not have any gross income.
  • Is not filing taxes.
  • Is not being claimed as a dependent of another taxpayer.

Even if you claim someone as your dependent, that individual may still have to file a tax return. This depends on the amount they earned, marital status, or whether or not they owe certain taxes. A very common example of this situation is parents claiming their adult children with relatively low income as their dependents. In this case a person being claimed as a dependent cannot use a personal exemption but the overall monetary benefit for the family is the greatest when parents use that exemption.

Last but not least, few other facts not to overlook:

  • e-filing tax returns is the most accurate and quickest option to complete with tax reporting requirement. The IRS reminds of support services that come handy if you are not familiar with e-file system. They are:
    • Volunteer Assistance
    • IRS Free File
    • Professional assistance – authorized IRS e-file Providers; these are private fee based services; you can search for those located near your residence by zip code.
  • This year taxpayers will have to report their level of health care coverage in the previous year. If you weren’t insured last year you may face a penalty unless you qualify to be exempt from having health insurance. Alternatively, you can make a shared responsibility payment when you file tax returns. New tax forms you may have to fill out are:
    • Form 8962 – Premium Tax Credit (PTC)
    • Form 8965 – Health Coverage Exemptions

Helpful links

What is a tax exemption?

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