Taking Personal Exemptions

In addition to taking either a standard deduction or itemizing your deductions, the IRS allows you to take a personal exemption. For 2009, each personal exemption is worth $3,650.

You may claim an exemption for yourself and for each dependent. Generally, you may claim at least one exemption for each person in your household.

Similar to itemized deductions, your personal exemption begins to phase out at higher incomes. This phase-out rule for losing your itemized deductions is also sometimes referred to as the "phase out" rule.

For married persons filing a joint return and persons filing as qualifying widow or widower, personal exemptions for 2009 begin to phase out when adjusted gross income (AGI) reaches $250,200. Personal exemption deductions are reduced by 2% for each $2,500 of additional income, which means they are reduced to zero when income reaches $372,700. However, for 2008-2009, the reduction itself is reduced by two-thirds, and for 2010 the personal exemption phase-out is eliminated.

For single taxpayers, personal exemptions begin to phase out when adjusted gross income reaches $166,800 in 2009. Personal exemption deductions are reduced by 2% for each $2,500 of additional income, which means they are reduced to zero when AGI reaches $289,300. For 2008-2009, reduction itself is reduced by two-thirds, and for 2010 the personal exemption phase-out is eliminated.

For persons filing as head of household, personal exemptions 2009 begin to phase out when AGI reaches $208,500, phasing out completely when income reaches $331,000. However, for 2008-2009, the reduction itself is reduced by two-thirds, and for 2010 the personal exemption phase-out is eliminated.

For married persons filing a separate return, personal exemptions for 2009 begin to phase out when AGI reaches $125,100, phasing out completely when income reaches $186,350. (For married persons filing separately, personal exemption deductions are reduced by 2% for each $1,250 of additional income.) For 2008-2009, the reduction itself is reduced by two-thirds, and for 2010 the personal exemption phase-out is eliminated.

To calculate a partial phase-out for a personal exemption, see IRS Pub. 501.

Next, we take a look at some of the more popular income tax credits available for tax year 2009.