Since we work on our taxes (usually) only once per year and even then many of us turn them over to professionals whether in the form of a tax accountant or a software program like TurboTax, our understanding and recollection of many of the terms and definitions used during tax time can become a little fuzzy.
I’ve been receiving a lot of questions on taxes via my contact page. Here is some information that I put together to help answer some of the most common questions about exemptions, dependents, and giving to charities.
What are tax exemptions?
Exemptions are legal ways to reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for qualified dependents. Each exemption allows you to deduct $3,700 on your 2011 tax return and $3,800 on your 2012 tax return.
What is a dependent?
A dependent is your qualifying child or qualifying relative for whom you provide more than 50% of their financial support. You must list the Social Security Number of any dependent for whom you claim an exemption. You generally can take an exemption for each of your dependents.