Tax Tips: What is an exemption?

An exemption is a deduction allowed for the taxpayer, a spouse, and dependents. Essentially, people who are supported by the income of the spouse and the taxpayer can become an exemption, if all the rules are followed.

Exemptions are most commonly taken for the taxpayer, the spouse, and any small children living in the home. But there are others who might also be an exemption, including children of divorce who don't live with you, an elderly sibling or parent supported by you, foster children, adopted children, and other relatives for whom you provide over half of the support.

The key to exemptions is that each person may only be claimed on one tax return. So, for example, if you've got small children living with your ex-wife, only one of you may claim the exemptions for those children.

Details on exemptions can be found in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

Your resource on tax filing
Tax season is here! Check out the Tax Center on AOL Finance for all the tips and tools you need to maximize your return.
3 Great Tips for Your 2022 Taxes
There's no reason to wait until tax time to start making sure you've checked all the right boxes. Here are three tips for making the most of your money when it comes to filing your taxes in 2022.
Read MoreBrought to you byTurboTax.com
4 Types of Tax Preparers
There are four general types of tax preparers: certified public accountants, enrolled agents, tax attorneys, and non-credentialed preparers. Here's a quick guide on the differences between them.
Read MoreBrought to you byTurboTax.com
Child Tax Credit
Tax reform has caused some changes to the rules for the Child Tax Credit in recent years. Here's how to know whether you qualify for this credit.
Read MoreBrought to you byTurboTax.com
Maximizing Tax Deductions for the Business Use of Your Car
The business use of your car can be one of the largest tax deduction you can take to reduce your business income. This is a big, big deal. Why two bigs? Because your business income is used to calculate two taxes: your personal income tax and your self-employment tax (the amount you pay into Social Security and Medicare as the owner of your rideshare business). Maximizing your deduction for the business use of your car will help you minimize these taxes.
Read MoreBrought to you byTurboTax.com