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Exemptions on Tax

Personal exemptions are like deductions that you can avail of if certain conditions are met. Exemptions can be claimed for yourself and your dependants. High income taxpayers cannot avail of exemptions as these get phased out.

Let us see who can avail of exemptions:
1. Self
You can claim an exemption if you are not the dependant of another taxpayer.
2. Spouse
You can claim an exemption if the spouse is not a dependant of another tax payer.
3. Dependants - Children and Relatives
You can claim an exemption if the children and relatives are not dependants of other tax payers.

The dependants whom you avail exemptions for need a social security number or taxpayer identification.

Tests for Dependency
There are tests for dependency that you must meet for a person to qualify for exemptions. These include:
1. Place of residence
This is to verify if the dependant stays with you.
2. Period of residence
The dependant must be with you for a minimum time period.
3. Age
In case of children the age needs to be verified.
4. Income
The dependant should require your money.
5. Your contribution to support
You must pay a substantial amount to your dependant.
6. Nationality

These basic tests determine if the exemption is valid and if the dependency exists. In case you have dependants, it is best you identify these criteria and claim your personal exemptions on tax. That should give you the excess funds required to finance your dependants to lead a good life.

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