It is very unfortunate for a taxpayer to miss a tax break. When you are filing your tax return remember, tax exemptions are never the same as tax deductions. Even though the purpose of both is the same, both lower your taxable income. The question remains, how are these two different?
Deductions vary from citizen to citizen. They vary depending on the tax payers filing status, or what type of personal and business expense they incur. Organizations and individuals have to file for a tax exempt status; they may only qualify depending on how much money they make.
Tax exemptions on the other hand, show a fixed sum that can be collected by taxpayers on behalf of themselves and their dependents.
A married couple can claim an exemption when filing their tax return. If both the spouses earn income they cannot claim for each other, but if one is earning and the other is not then that spouse can definitely claim for exemption for both of them.
You can claim a separate exemption for each of your dependents. It may sound really simple but by dependents the IRS does not mean just your children. The agency will treat someone as your dependent if they are your ‘qualifying relative’ or a ‘qualifying child’. A qualifying relative is someone you provide financial assistance to but who does not fit under the category of qualifying child. A qualifying child is described as your child, your foster child, your step child, half brother/sister. Step brother/ sister or a descendents of any of these. Also a qualifying child is of less than 19 years old.
The personal exemptions along with baseline exemptions are crafted to exempt a certain baseline level of income from taxation. The exemption is designed to benefit people who earn lower income than the limit published by the IRS.
If you are self employed then you will have to pay up the self employment tax when you are filing in April. Now this tax contributes to the Medicare and social security trust funds. However the tax code understands that not all tax payers may want to collect Medicare assistance when they retire. Therefore they should not have to pay for this. Because of this the IRS limits the self employment tax exemption to licensed clergy members and members of some religious groups who do not wish to receive social services from the government.
Disabled veterans can exclude all disability pension benefits through their gross income including grants for motor vehicles and homes. Moreover any money that a veteran earns is tax exempt. Disabled veterans have made great sacrifices for their country and these disabilities may not allow them to get better paying jobs.
Foreign Trainees and Teachers
If you are a not a citizen of the United States living in the country as a trainer or a teacher, then you are allowed to exempt for all of the days lived here.
If you need more information about our accounting and tax services, please contact us at 407-502-2400. Freedomtax Accounting’s staff has been providing honest accounting services and tax services for 15 years. Our Orlando accounting and tax firm has its main offices in Kissimmee, FL. Our services are provided nationwide, but mainly in the Central Florida market to areas like Orlando, South Orlando, Kissimmee, St. Cloud, Poinciana, Clermont, Davenport, Hunters Creek, Lake Nona, Celebration, Winter Park, Windermere, Dr. Phillips, Maitland, Altamonte Springs, Winter Garden, Ocoee, Apopka, Belle Isle, Edgewood, and Oakland FL. Our tax accountants and IRS enrolled agents (irs ea) specialize in corporate accounting and bookkeeping, tax services, tax preparation, back taxes help, tax debt relief, tax resolution, tax planning, itin number, incorporations, and non profit 501c3 tax exempt.