IRS Standard Deduction & Exemption Amounts 2024 & 2025

Check our One Big Beautiful Bill article for more information. Based on the 2024 tax brackets, Josh and Kristen owe $6,412 in taxes. However, they are eligible for the Child Tax Credit since they have two qualifying children as dependents. When that credit is subtracted from their tax liability, their total tax bill is reduced to $2,412.

• For example, a $3,000 below-the-line itemized deduction reduces your taxable income by $3,000.
• If you have qualified dependents, you may be eligible for certain credits and deductions.
• Identify any eligible expenses, maintain accurate records, and choose between itemized and standard deductions based on maximum benefit.
• Taxpayers who qualify for exemptions can save money by reducing their taxable income.
• If your deductible expenses and losses are more than the standard deduction, you can save money by deducting them one-by-one from your income (itemizing).

Or get unlimited help and advice from tax experts while you do your taxes with TurboTax Live Assisted. And if you want to file your own taxes, TurboTax will guide you step by step so you can feel confident they’ll be done right. No matter which way you file, we guarantee 100% accuracy and your maximum refund.Get started now by logging into TurboTax and file with confidence. You may be able to elect to have federal income tax withheld from your paychecks by changing your W-4 at work.

Uninsured This Tax Season? See How You Can Save Money with Exemptions

• The Child Tax Credit doubled to a maximum of $2,000 per child under the Tax Cuts and Jobs Act, from $1,000 per dependent previously.
• Qualified distributions from Roth 401(k) plans and Roth IRAs are also tax-exempt.
• Although both exemptions and deductions reduce your total taxable income, they differ from one another in significant ways.
• You can also claim an exemption for your spouse if you are married filing jointly.
• Additionally, Josh and Kristen’s IRA contributions are an above-the-line deduction and provide a tax benefit even though they use the standard deduction.

Before the Tax Cuts and Jobs Act in 2018, the Internal Revenue Code allowed taxpayers to claim exemptions that reduced their taxable income. You could claim personal and dependent exemptions to lower your taxable income, ultimately reducing the total tax you owed for the year. These exemptions were suspended as of 2018, which means you can’t currently claim them for tax year 2023.

State and local exemptions

For tax year 2023, the standard deduction increases to $13,850 if you file as single, $20,800 for heads of household, and $27,700 for married filing jointly taxpayers. The standard deduction can lower a taxpayer’s taxable income by allowing them to deduct a specified amount defined by the IRS on their tax return. The standard deduction reduces the amount of taxable income, dollar-for-dollar. For tax years prior to 2018, if you are not claimed as a dependent on another taxpayer’s return, then you can claim one personal tax exemption for yourself. The exemption reduces your taxable income just like a deduction does, but typically has fewer restrictions to claiming it. If you are married and file a joint tax return, both you and your spouse each get to claim an exemption.

A financial advisor can help guide you on your taxable income. They can also advise you on taxes that might impact your investments. Some credits are refundable — they can give you money back even if you don’t owe any tax. All features, services, support, prices, offers, terms and conditions are subject to change without notice. For an organization to receive tax-exempt status, it has to satisfy all of the necessary IRS requirements.

In Massachusetts, the state provides many telecommunication companies that provide cable television, Internet access and public broadcasts of radio and television an exemption from sales tax. Many cities and states also offer sales tax holidays where consumers can purchase goods without paying state or local sales taxes. Tax filers were only able to claim a personal exemption if that person was not claimed as a dependent on someone else’s income tax return. This rule intentionally set exemptions apart from deductions. For example, take a college student with a job whose parents claimed them as a dependent on their income tax return.

Related Content

As you can see, while Josh and Kristen’s church donation is an itemized deduction, the amount ($3,400) is far less than the standard deduction ($27,700). So, their charitable contribution doesn’t provide any tax benefit. Additionally, Josh and Kristen’s IRA contributions are an above-the-line deduction and provide a tax benefit even though they use the standard deduction. The IRS permits companies that meet certain criteria under Internal Revenue Code Section 501(c)(3) to be exempt from federal tax. These organizations include but are not limited to religious, charitable, scientific, literary, educational, or other specific types of entities. Charlene Rhinehart is a personal finance writer and former financial analyst.

TurboTax Tip:

Even if you qualified for a personal exemption, it didn’t mean you were able to claim the full amount. Based on your adjusted gross income (AGI), you would begin to phase out at a certain threshold. This major shift has likely changed how you approach your taxes.

If you file a paper return, your deductions go on Form 1040 and may require extra forms. To claim credits, answer questions in your tax filing software. If you file a paper return, you’ll need to complete a form and attach it.

Most people take the standard deduction, which lets you subtract a set amount from your income based on your filing status. This is a refundable credit, so you can get back more than you pay in taxes. If you qualify, you can claim it even if you don’t normally file taxes or aren’t required to file. With TurboTax Live Full Service, a local expert matched to your unique situation will do your taxes for you start to finish.

What is an example of a tax credit?

Most readers are still primarily focused on 2024 tax returns, so we’ll detail both 1040 exemptions the 2024 standard deduction and 2025 standard deduction amounts in this article. If you make too much money, the amount of your personal exemption will be reduced. For the 2017 tax year, the personal-exemption phaseout begins if your adjusted gross income is over $261,500 (for single filers) or $313,300 (for married couples filing jointly). The exemption completely disappears for singles who earn $384,000 or more and joint filers who earn $436,300 or higher.

One of the main criteria you need to meet is to ensure that your dependent is considered a qualifying child or qualifying relative. When you’re ready to claim dependent tax exemptions, go to Form 1040A or 1040. A business may be exempt from paying state, county, and municipal taxes if it is located in an area where governments provide tax exemptions to businesses to stimulate the local economy.