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Specifically, you can claim exemptions for yourself, your spouse, and your dependents. The IRS assigns a set dollar amount for each exemption, and this amount is subtracted from your adjusted gross income (AGI) to determine your taxable income. Lower taxable income generally leads to a lower tax bill.
Exemptions Are in Addition to Deductions
Lina emphasizes that tax exemptions are separate from tax deductions, whether they are the standard deduction or itemized deductions. Deductions reduce your taxable income based on specific expenses or circumstances, while exemptions account for the number of people relying on your income. Both serve the purpose of lowering your overall tax burden, but they are calculated and applied differently.