Siesta Key, FL (PRWEB) November 16, 2012
Tax exemptions are the deductions a taxpayer gets for himself or herself and for each person who qualifies as a “dependent.” LegaLees Corporation has released a new tutorial to help middle class Americans protect the tax exemptions they have today. Tax exemptions are important because they help lower a taxpayer's adjusted gross income, but they are only one way to lower adjusted gross income.
In 2012 the exemption is $3,800 per person. The problem the middle class is not facing is they are going to lose their personal tax exemptions because the alternative minimum tax, which phases out tax exemptions, has been lowered to only $45,000 for couples and $33,750 for singles. (See IRS What’s New for 2012)
“The great thing about the individual tax exemptions is the money is deducted from the person’s income before their adjusted gross income is calculated,” said Hal Rosen, a CPA in Salt Lake City who specializes in small business taxes.
Tax exemptions include one exemption for the taxpayer and then an additional exemption for each dependent. The normal scenario is the spouse is one exemption and each child is another exemption.
However, there are complex rules governing who can “qualify” for one of the tax exemptions. For example, the child has to be under age 19 and living at home or be a full time student under age 24, and they can’t supply more than half of their own support.
A taxpayer can “qualify” other people for tax exemptions. Relatives who live with the taxpayer can be qualified under specific rules. The person qualifying as one of the tax exemptions may or may not actually be living with the taxpayer. The person qualifying to be claimed as one the taxpayer's tax exemptions must:
Be a relative under the definition of “relative” or be a full-time occupant of your home
Be a US citizen or resident of Mexico or Canada
Not file a joint income tax return with anyone
Receive over half their support from you
Have less than $3,800 in gross income in 2012
"Relative" is defined by the IRS. People generally considered relatives are:
“Taxpayers should take advantage of every one of the tax exemptions they can get,” said Lee Phillips, attorney. “The problem is the middle class has now basically lost their tax exemptions, because they are subject to the alternative minimum tax even if they are only making $45,000,” he explained.
“By basically eliminating tax exemptions, the government is imposing a huge tax increase on the middle class. It’s subtle, because the politicians will say they haven’t raised taxes on the middle class, when in fact the middle class ends up paying a lot more out of pocket for taxes," he said
LegaLees Corporation has released a free tutorial on tax exemptions and how to lower adjusted gross income in general. For more information on these topics get the free tutorial.