What is personal allowance? The 2005 amount $3,200, is this amount more beneficial to a single person (no dep

Question

What is personal allowance? The 2005 amount $3,200, is this amount more beneficial to a single person (no dependents) who earned $10,000 or a single person (1 dependent) who earned $10,000.

Answer 1

Steve F's answer is dead on for 2006. For 2005, the $5,000 standard deduction is added to one exemption $3,200 or two exemptions $6,400 to get the total deduction.

The total deduction for one exemption is $8,200 ($5,000+$3,200)and for two it is $11,400.

Total taxable income is $1,800 ($10,000-$8,200) for one and $0 for two.

Total tax is $180 (10% of $1,800) for one and $0 for two.

So, in 2005, your tax savings for claiming a dependent is $180. For 2006, your tax savings for claiming a dependent is $155. Something, but not much. If the dependent is your qualifying child, you may get to claim the Earned Income Credit and/or Child Tax Credit to increase your refund, but that is a totally different topic.

Answer 2

Personal exemptions (not allowances) are claimed on your tax return. A single with no dependents would receive one $3,300 exemption. A single with one dependent claims two (one for himself and one for the dependent) totaling $6,600. The standard deduction of $5,150 is the same in both cases. With no dependents you taxable income would be $1,550. With one dependent, it would be $0

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