In addition to taking either the standard deduction or itemizing your deductions, you can reduce your taxable income by claiming personal exemptions. Each exemption is worth a specific dollar amount, adjusted annually for inflation.

Your exemption amount is claimed on Form 1040 or 1040A in the same area where you take your itemized or standard deduction. But your exemptions actually show up very early in the filing process. (In fact, you first encountered the concept of exemptions when you filled out your W-4, where you and your family members were taken into account as allowances to help you arrive at your correct withholding amount.)

Where it is

On the first page of the 1040 or 1040A you’ll find a section to list your exemptions: one each for you, your spouse and any dependents, either children or other qualifying persons. Be sure to include your dependent’s Social Security number or your exemption claim could be disallowed. Before leaving this section of your return, tally up the total number of exemptions you can claim.


Last subtraction

That total is transferred to page two of the 1040 or 1040A, where you use it to come up with the actual tax-dollar value of your exemptions; this is the last number you subtract to get to your taxable income amount. Exemptions are also allowed on the 1040EZ, but this shortest tax form is for filers without dependents, so there’s no section here for added exemption entries. Neither will you find the specific exemption amount listed on the 1040EZ; instead that figure and the standard deduction amount are combined on the EZ return.

Be alert

One other thing to look out for: Exemption amounts are reduced for higher-income taxpayers. After a certain earnings level (shown on the return and also inflation-adjusted annually), the value of each exemption starts to phase out.