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Exemption
An exemption is a reduction in net income allowed on account of status or dependency. Thus in arriving at the tax base, or the figure at which the tax rates are applied, net income is reduced by the amount of personal and dependency exemptions. Individuals, estates and trusts are allowed exemptions. Every estate is allowed an exemption of $600. A trust is allowed an exemption of $100 or $300, depending on the type of trust. Except for dependents, every individual taxpayer is allowed at least one exemption of $4,050 in 2016 (adjusted for inflation). On a joint return, the two (or more) exemptions of both the husband and wife are allowed. One spouse is allowed the exemption (or exemptions) of the other on a separate return if the other has no gross income and is not the dependent of another person. Exemptions are also allowable for dependents of the taxpayer.