Personal tax exemptions are designed for tax payers who support themselves or any qualified dependents. A personal tax exemption is essentially a tax deduction that reduces the income on which you are taxed each year.
Your exemption can reduce the amount of taxes taken from your check each month and how much you pay or receive back as a tax refund at the end of each tax year.
Personal tax exemption amounts are adjusted each year to account for inflation. For example in 2013 it raised from $3,800 to $3,900. The amount personal tax exemptions increase varies from year to year, and sometimes does not increase at all. The chart below allows you to see the changes for the last decade.
To determine how many dependents you can claim you have to determine who qualifies:
For example, two college sophomores get married in November of 2013 and prior to being married each of their parents financially supported them. In this case their parents can claim them as dependents in tax year 2013 and in 2014 they can file a joint return.
Some personal exemptions are reduced in correspondence with a personal exemption phaseout, also called a PEP. For the last three tax years the PEP was eliminated, but returns again in tax year 2013. The PEP phaseout is as follows:
Joint Filing $300,000-$422,500
Head of Household $275,000-$397,000
Married & Filing Individually $150,000-$211,250
To determine your which tax deductions and phaseouts you qualify for visit TurboTax online and take their tax calculating software for a test run.