PERSONAL EXEMPTIONS
For 2009, a $3,650 deduction is allowed for each personal exemption. However, this amount is reduced by two percent for each $2,500 ($1,250 in the case of a married person filing a separate return), or fraction thereof, that AGI exceeds the following amount. These reductions are also partially restored for 2009 under rules similar to the rules that apply to the three-percent-of-AGI rule for overall itemized deductions. In 2010 there will be no reduction of the personal exemption as a result of AGI in excess of certain thresholds.
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Filing Status
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2009 Threshold
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Head of Household
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$ 208,500
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Married filing joint return and qualifying surviving spouse with dependent child
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$ 250,200
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Married filing separate return
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$ 125,100
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Single
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$ 166,800
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A child cannot claim an exemption on his or her return or qualify for a higher education credit if the child’s parents claim a dependency exemption for the child on their return.
Planning Suggestion: If you pay college tuition for your child but you are ineligible for the Hope Scholarship Credit or Lifetime Learning Credit because your AGI is more than the allowed income limitation (see box, page 17), it may be beneficial to forgo claiming an exemption for your child so that your child can claim the credit on his or her return.
UNIFORM DEFINITION OF “CHILD”
There is a uniform definition of qualifying child for the purposes of determining the dependency exemption, the child credit, the earned income credit, the dependent care credit, and head of household filing status for 2004 and later. A child is determined to be a qualifying child of a taxpayer if a residency test, a relationship test, and an age test are met. Pre-2004 law regarding support and gross income tests in determining qualification as a dependent generally does not apply if the child satisfies the uniform definition.