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Video instructions and help with filling out and completing Will Form 8815 Exempt

Instructions and Help about Will Form 8815 Exempt

Next come your exemptions. Each exemption you claim can lower your taxable income by about $2,500, and this amount increases each year with inflation. Note that exemptions have nothing to do with your deductions, including the standard deduction. It's true that both exemptions and deductions reduce your taxable income, but they're different things. Put simply, exemptions deal with the number of people living in your household, while deductions deal with your lifestyle. For example, if you're over age 65, you still get only one exemption, but if you're over age 65, you get a higher standard deduction. The same thing applies if you're blind – one exemption but a higher standard deduction. Or suppose you live in a big house with a big mortgage – this lifestyle leads to a big mortgage interest deduction, but it doesn't affect the number of exemptions you can claim. Exemptions and deductions are different, so determining the number of exemptions you can claim should be as easy as counting the number of warm bodies in your home. Unfortunately, it's not that easy. If you're not a dependent, you can claim yourself as an exemption. If you're married filing jointly, you can claim your spouse. Your marital status is determined as of the last day of your filing year, usually December 31st. If you are married to someone on December 31st, according to the IRS, you are married to that person for the whole year. When it comes to dependents, however, things get more difficult because each dependent you claim cuts your taxable income by about $2,500. A middle-class taxpayer in the 28 percent bracket cuts his total tax liability by about $700 for each dependent he claims. So, there's an incentive to claim as many dependents as possible. I've even heard stories of people...