A Dependency Exemption allows taxpayers to deduct a specified amount for each dependent claimed on their tax return, reducing their overall taxable income. It is designed to assist families by acknowledging the financial responsibility involved in supporting dependents.
A dependent is any person whom a taxpayer can claim a dependency exemption for, defined by the Internal Revenue Code as any individual supported by the taxpayer who is related to the taxpayer in specified ways or who makes their principal abode in the taxpayer's household.
A surviving spouse refers to a widow or widower who outlives their partner. In tax terms, a surviving spouse may file a joint return with the deceased spouse in the year of death and use joint return tax rates for two years following the spouse's death if certain conditions are met.
Tax-exempt income refers to specific types of income that are not subject to federal income tax. This includes certain Social Security benefits, welfare benefits, nontaxable life insurance proceeds, armed forces family allotments, nontaxable pensions, and tax-exempt interest.
