Tax Tips: Deciding how many exemptions to take
This is Part III of PennySaverUSA’s tax tips series
The final step of the tax process is actually filing your taxes. The process begins when you are first hired at your job and decide how many exemptions you would like to claim.
There are two types of exemptions you can take:
- Personal Exemptions
- Dependency Exemptions
A personal exemption is the amount you can deduct from your taxable income.
The exemption for a single person is $3,700. If you are married, you can claim your spouse as a second exemption also worth $3,700 for a total of $7,400.
A dependency exemption is the amount you can deduct from your taxable income for each dependent you have. According to the IRS web site, the term dependent means a qualifying child (defined here) or a qualifying relative (defined here).
The complete rules for claiming a dependent can be found here on the IRS web site.
“When you claim 0 exemptions, the government is going to take a higher amount of taxes from your paycheck. If you take more exemptions, they’ll take out less from your paycheck,” said Academia. “So if you need a little extra money each paycheck, you should claim your exemption(s), but if you are doing fine and are comfortable (financially), you (could) put 0 exemptions and you get more at the end of the year.”
For more information about tax exemptions, please contact Tracy at (951) 485-5536 or scan PennySaverUSA.com to find local tax services in your area.