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In computing how much of your income is actually subject to federal income tax, you're automatically entitled to subtract two amounts: a personal exemption, and a standard deduction. The sum of these amounts is not taxed, period. Of course, you can choose to itemize your deductions rather than claiming the standard deduction, if itemizing would result in a lower tax bill. The remainder of this section explains personal exemptions and how to determine whether a particular person is your dependent or not.
The rule is that one (and only one) personal exemption is available for every individual - adult or child. The amount of the exemption is $3,700 for 2011. This amount is indexed for inflation every year.
So, on a joint return, you could automatically claim one exemption for yourself and one for your spouse, for a total of $7,400. You can claim an exemption for your spouse even if he or she died during the year, provided you have not remarried.
If you are married filing separately, you can claim your spouse's exemption on your own return only if your spouse had absolutely no gross income for the year and was not the dependent of any other individual.
Besides the personal and spousal exemptions, you should also claim an exemption for each of your dependents. The catch is that if you can claim a dependency exemption for an individual, that person may not claim a personal exemption on his or her tax return.
Dependency exemptions have their own set of rules, including: