When planning your estate or considering whether to create a will or a living trust, it is important to consider whether you will be entitled to tax exemptions. Tax exemptions allow you to be able to lower the income that can be taxed, therefore increasing your pocketable income. Tax exemptions must be claimed, and you are generally able to claim them on your own behalf, but also on behalf of your spouse and any dependents that you have.
This blog will provide a brief overview on tax exemptions and how personal exemptions tend to differ from exemptions made on behalf of dependents.
Claiming your tax exemptions
Tax exemptions can be claimed through tax forms. There are several forms that you can claim tax exemptions from, and these are Form 1040EZ, Form 1040A and Form 1010.
Claiming personal exemptions
You are able to claim a single tax exemption for yourself, and if applicable, you can also claim a single tax exemption for your spouse. You can only take out a tax exemption for yourself if you are not another taxpayer’s dependent. In regard to your spouse, they can only claim a tax exemption from you if they themselves do not have an income.
Claiming exemptions on behalf of dependents
A dependent can be defined as a child or relative of yours. A dependent cannot be a person who is married and part of a joint tax return. The dependent must also be a U.S. citizen, resident or national, and cannot reside in Canada or Mexico.
If you have any questions about tax exemptions in relation to estate planning, it is advisable to seek trusted legal guidance.
Source: Findlaw, “Tax exemptions,” accessed Sep. 15, 2017