The personal exemption limits for the year 2014 was $3,950, About.com notes. Taxpayers are entitled to take a personal exemption for themselves and each of their dependents. The personal exemption amount is adjusted annually for inflation.Continue Reading
A personal exemption is similar to a tax deduction in that it allows taxpayers to reduce their taxable income, subsequently lowering their taxes, About.com says. In 2015, the personal exemption amount increased $50 to $4,000.
Taxpayers can take one exemption for themselves as long as another taxpayer can't claim them as dependents, the IRS notes. A married person can take an exemption for his spouse when filing a joint return, but married filing separate dictates taking a personal exemption for the other spouse if that spouse had no gross income, is not a dependent of another taxpayer and is not fling her own tax return.
Taxpayers claim personal exemptions for each dependent that a taxpayer can claim, even if that dependent files his own tax return. There are threshold amounts set up by the IRS that provide for a phase-out of a personal exemption, About.com notes. The exemption is gradually reduced by 2 percent for each $2,500 of the adjusted gross income that exceeds the established threshold amount.Learn more about Income Tax