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My question is: do the numbers below include the personal exemption?

I found this tax data for 2016:

Table 2. 2016 Standard Deduction and Personal Exemption (Estimate)

    Filing Status Deduction Amount

      Single
     $6,300.00

    Married Filing Jointly
     $12,600.00

    Head of Household
     $9,300.00

    Personal Exemption
     $4,050.00

For example, if my salary were to be 50k and I were filing single, am I taxed on:

A) $39,650 ($50,000-$6,300-$4,050) or

B) $43,700 ($50,000 - $6,300)

I'm trying to keep this example as simplistic as I can, so I'm not assuming any additional circumstances (mortgage interest or student loan interest refunds, 1 allowance, itemization, etc.)

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  • The two are both applied, though the "standard deduction" may be replaced with "itemized deductions" if appropriate. Beyond that, it's unlikely to cause trouble, but read your W-4 carefully. Note that you put your signature on it because you declare the numbers to be correct "Under penalties of perjury...". I've never known a problem to come out of it unless you go overboard. Claiming only (1) when you could legally claim (2), for example, is common enough. Mar 16 '16 at 8:33
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Answer for Tax Year 2017 and earlier:

The personal exemptions are separate from the deductions.

Personal exemptions are based on the number of people in your household. If you are single with three kids all living under one roof, you would generally claim 4 exemptions, or $4050 * 4 = $16,200.

The standard deduction is based on your filing status. If you file as single, you can deduct $6,300 through the standard deduction, without listing your deductions. Alternatively, if you have more deductible expenses than your standard deduction, you can itemize your deductions on Schedule A and deduct the actual expenses. If you itemize, you don't take the standard deduction anymore, but you still claim your exemptions.

To answer your example question explicitly, the answer is A. Both the standard deduction amount and the personal exemption amount get subtracted from your income before taxes are calculated.


Answer for Tax Year 2018 and later:

With the tax reform beginning in tax year 2018, the "personal exemptions" for dependents reducing your income have been eliminated. Instead, the standard deduction has been increased, and there is a "Child Tax Credit" and a "Credit for Other Dependents" that is applied to the tax liability based on the number of dependents you have.

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5

Personal exemption and standard deduction are two unrelated things. You can replace the standard deduction with itemized list of deductions (using Schedule A for it), the personal exemption is a constant number.

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