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Short Guide to Personal Tax Exemptions and Phaseout

Almost everyone filing an individual or joint tax return in the US can claim one or two individual tax exemptions that lower their taxable income by $3,950 for the 2014 tax year. But there is a catch, for those earning higher incomes.


This page:

  • Defines tax exemptions

  • Explains when married individuals can claim two exemptions

  • Describes the personal exemption phaseout

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What are tax exemptions?

Tax exemptions are fundamentally a discount on your taxable income, which the government uses to allow you to keep some of your income tax-free.

Most individuals filing a return get to claim a single tax exemption, which for the 2014 tax year stands at $3,950. So, for example, if you earned $45,000 last year, right off the bat, before any other credits/deductions/etc. are considered, your taxable income shrinks to $41,050.

A nice deal. Sort of.

If you are married, and file a joint return, you can double your personal exemptions to $7900, since there are two of you paying taxes on the same return.

You can also claim two exemptions for yourself and your spouse when filing as Head of Household, provided your spouse had no gross income in 2014, and he or she cannot be claimed as a dependent on anyone else's return.

One exception occurs when (for example) a young person files a return for a summer job or something along those lines. If that person does not claim an exemption on her own return, you can claim her on your own return, even though she also files a return.

However, this gets into the rules for claiming dependent tax exemptions, which we discuss in a separate guide (just click the previous link).

What is "personal exemption phaseout"?

As a way to insure that high-income earners didn't take advantage of "tax discounts" intended to help lower-income and middle-class individuals and families, the Congress has instituted a gradual phaseout of tax exemptions for high-income individuals.

The fairness of this action is debatable, but that is not the scope of this article.

In any case, the phaseout begins at a fairly high income level ($250,000 for single filers in 2014), and it is gradual, with the exemptions diminishing to $0 for single filers earning $372,000 in 2014.

This chart shows the phaseout for all types of filers:

Filing Status Phaseout Begins Phaseout Ends
Single $254,200 $376,700
Head of Household $279,650 $402,150
Married Filing Jointly or Qualifying Widow(er) $305,050 $427,550
Married Filing Separately $152,525 $213,775



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To insure that you claim the correct tax exemptions, both for yourself and your dependents, we highly recommend using the H&R Block filing interview.

With a few simple questions, H&R Block will pick the most beneficial status and exemptions you are eligible to file under, and you will be able to prepare your return knowing that you're not making any mistakes.

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Related IRS Publications

You can get more information about federal income tax exemptions directly from the IRS, in the form of Publication 501.




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