Generally, you can deduct $2,900 for each exemption you claim in 2001. However, if your adjusted gross income is more than $99,725, see Phaseout of Exemptions, later.

There are two types of exemptions: personal exemptions and exemptions for dependents. If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim his or her personal exemption on his or her own tax return.

Personal Exemptions

You can claim your own exemption unless someone else can claim it. If you are married, you may be able to take an exemption for your spouse. These are called personal exemptions.

Exemption for Your Spouse

Your spouse is never considered your dependent. You may be able to take an exemption for your spouse only because you are married.

Joint return. On a joint return, you can claim one exemption for yourself and one for your spouse.

If your spouse had any gross income, you can claim his or her exemption only if you file a joint return.

Separate return. If you file a separate return, you can take an exemption for your spouse only if your spouse had no gross income and was not the dependent of another taxpayer. If your spouse is the dependent of another taxpayer, you cannot claim an exemption for your spouse even if the other taxpayer does not actually claim your spouse's exemption.

Alimony paid. If you paid alimony to your spouse, you cannot take an exemption for your spouse. This is because alimony is gross income to the spouse who received it.

Divorced or separated spouse. You cannot take an exemption for your former spouse for the year in which you were divorced or legally separated under a final decree. This rule applies even if you paid all your former spouse's support that year.

Exemptions for Dependents

You can take an exemption for each person who meets all five of the dependency tests discussed later.

If you can claim an exemption for your dependent, the dependent cannot claim his or her own exemption on his or her own tax return. This is true even if you do not claim the dependent's exemption on your return or if the exemption will be reduced or eliminated under the phaseout rule for high-income individuals.

Dependency Tests

The following five tests must be met for you to claim an exemption for a person (dependent) other than yourself or your spouse.

1. Member of Household or Relationship Test.
2. Citizen or Resident Test.
3. Joint Return Test.
4. Gross Income Test.
5. Support Test.

1. Member of Household or Relationship Test

To meet this test, the person must either:

1. Be related to you, or
2. Live with you for the entire year as a member of your household.

Related. A person related to you in any of the following ways meets this test even if he or she did not live with you for the entire year as a member of your household.

Child	Stepmother
Stepchild	Stepfather
Mother	Mother-in-law
Father	Father-in-law
Grandparent	Brother-in-law
Great-grandparent	Sister-in-law
Brother	Son-in-law
Sister	Daughter-in-law
Grandchild	If related by blood:
Great-grandchild	Uncle
Half-brother	Aunt
Half-sister	Nephew
Stepbrother	Niece
Stepsister

Any relationships that have been established by marriage are not considered ended by death or divorce.

Child. Your child is:

1. Your son, daughter, stepson, stepdaughter, or legally adopted son or daughter,
2. A child who lived with you in your home as a member of your family, if placed with you by an authorized placement agency for legal adoption, or
3. A foster child (any child who lived with you in your home as a member of your family for the entire year).

Authorized placement agency. An authorized placement agency includes any person authorized by state law to place children for legal adoption.

Member of household. If the person is not related to you, he or she must have lived in your home as a member of your household for the entire year (except for temporary absences, such as for vacation or school). A person is not a member of your household if at any time during your tax year the relationship between you and that person violates local law.

2. Citizen or Resident Test

To meet the citizen or resident test, a person must be a U.S. citizen or resident, or a resident of Canada or Mexico for some part of the calendar year in which your tax year begins.

Children usually are citizens or residents of the country of their parents. If you were a U.S. citizen when your child was born, the child may be a U.S. citizen although the other parent was a nonresident alien and the child was born in a foreign country. If so, and the other dependency tests are met, the child is your dependent and you may take the exemption. It does not matter if the child lives abroad with the nonresident alien parent.

Special rule for your adopted child. If you are a U.S. citizen who has legally adopted a child who is not a U.S. citizen or resident and the other dependency tests are met, you can take the exemption if your home is the child's main home and the child is a member of your household for the entire year.

3. Joint Return Test

Even if the other dependency tests are met, you are generally not allowed an exemption for a person other than yourself or your spouse if he or she files a joint return. However, this test does not apply if a joint return is filed by a dependent and his or her spouse merely as a claim for refund and no tax liability would exist for either spouse on separate returns.

4. Gross Income Test

Generally, you cannot take an exemption for a person other than yourself or your spouse if that person had gross income of $2,900 or more for the year. All income in the form of money, property, and services that is not exempt from tax is gross income. Gross income does not include nontaxable income, such as welfare benefits or nontaxable social security benefits.

Special rules for your child. The gross income test does not apply if your child:

1. Is under age 19 at the end of the year, or
2. Is a student under age 24 at the end of the year.

Child. See 1. Member of Household or Relationship Test, earlier, for the definition of "child."

Student. To qualify as a student, your child must be, during some part of each of 5 calendar months during the year (not necessarily consecutive):

1. A full-time student at a school that has a regular teaching staff and course of study, and a regularly enrolled body of students in attendance, or
2. A student taking a full-time, on-farm training course given by a school described in (1) above or by a state, county, or local government.

A full-time student is one who is enrolled for the number of hours or courses the school considers to be full-time attendance.

The term "school" includes elementary schools, junior and senior high schools, colleges, universities, and technical, trade, and mechanical schools. It does not include on-the-job training courses, correspondence schools, or night schools.

5. Support Test

You must provide more than half of a person's total support for the calendar year to meet the support test. If you file a joint return, the support could have come from you or your spouse. Even if you did not provide over half the person's support, you will be treated as having provided over half the support if you meet the tests explained later under Multiple Support Agreement.

If you are divorced or separated and you or the other parent, or both together, provided over half your child's support for the year, the support test for your child may be based on a special rule. See Support Test for Children of Divorced or Separated Parents, later.

In figuring total support, you must include money the person provided for his or her own support, even if this money was not taxable (for example, gifts, savings, and welfare benefits). If your child was a student, do not include amounts he or she received as scholarships while a full-time student.

Support includes food, a place to live, clothes, medical and dental care, recreation, and education. In figuring support, use the actual cost of these items. However, the cost of a place to live is figured at its fair rental value.

Support does not include income tax, social security and Medicare taxes, premiums for life insurance, or funeral expenses.

Joint ownership of home. If the person lives with you in a home that is jointly owned by you and your spouse or former spouse, and each of you has the right to use and live in the home, each of you is considered to provide half of the person's lodging. However, if your decree of divorce gives only you the right to use and live in the home, you are considered to provide the person's entire lodging. This is true even though legal title to the home remains in the names of both you and your former spouse.

Capital items. You must include capital items such as a car or furniture in figuring support, but only if they were actually given to, or bought by, the person for his or her use or benefit. Do not include the cost of a capital item for the use or benefit of other members of the household. For example, include in support a bicycle purchased by and used solely by the person for transportation; do not include a lawn mower you purchase that is occasionally used by the person.

Support Test for Child of Divorced or Separated Parents

The support test for a child of divorced or separated parents is based on the special rule explained here and in Figure 1. However, the special rule applies only if the parents meet all three of the following requirements.

1. The parents are:
1. Divorced or legally separated under a decree of divorce or separate maintenance,
2. Separated under a written separation agreement, or
3. Lived apart at all times during the last 6 months of the calendar year.
2. One or both parents provide more than half the child's total support for the calendar year.
3. One or both parents have custody of the child for more than half the calendar year.

Figure 1. Support test for child of divorced or separated parents

The special rule does not apply if:

• The child's support is determined under a multiple support agreement discussed later, or
• The child's parents never married each other.

Child is defined earlier under 1. Member of Household or Relationship Test.

Support provided by others. Support provided to a child of a divorced or separated parent by a relative or friend is not included as support provided by the parent. However, if you remarried, the support your new spouse provided is treated as provided by you.

Example 1. You are divorced. During the whole year, you and your child lived with your mother in a house she owns. You must include your child's share of the fair rental value of the home in figuring total support, but not as part of the support provided by you.

Example 2. You have two children from a former marriage who lived with you. You remarried and lived in a home owned by your present spouse. Your child's share of the fair rental value of the home is treated as provided by you.

Custodial parent. Under the special rule, the parent who had custody of the child for the greater part of the year (the custodial parent) is generally treated as the parent who provided more than half of the child's support. This parent is usually allowed to claim the exemption for the child if the other dependency tests are met. However, see Noncustodial parent, later.

Custody. Custody is usually determined by the terms of the most recent decree of divorce or separate maintenance, or a later custody decree. If there is no decree, it will be determined by the written separation agreement.

If neither a decree nor an agreement establishes custody, then the parent who had physical custody of the child for the greater part of the year is considered to have custody of the child. This also applies if a decree or agreement calls for "split" custody, or if the validity of a decree or agreement awarding custody is uncertain because of legal proceedings pending on the last day of the calendar year.

If the parents were divorced or separated during the year after having had joint custody of the child before the separation, the parent who had custody for the greater part of the rest of the year is considered the custodial parent.

Example 1. Under the terms of your divorce decree, you had custody of your child for 10 months of the year. Your former spouse had custody for the other 2 months. You and your former spouse provided the child's total support. You are considered to have provided more than half the child's support because you are the custodial parent.

Example 2. You and your former spouse provided your child's total support for the year. You had custody of your child under your 1990 divorce decree, but in October 2001, a new custody decree granted custody to your former spouse. Because you had custody for the greater part of the year, you are the custodial parent and are considered to have provided more than half of your child's support.

Example 3. You were separated on June 1. Before the separation, you and your spouse had joint custody of your child. Your spouse had custody from June through September and you had custody from October through December. Because your spouse had custody for 4 of the 7 months following the separation, your spouse was the custodial parent for the year and is treated as having provided more than half of the child's support for the year.

Noncustodial parent. Under the special rule, the parent who did not have custody, or who had it for the shorter time, is the noncustodial parent. The noncustodial parent is treated as the parent who provided more than half of the child's support if any one of the following three conditions is met.

1. The custodial parent signs a written declaration that he or she will not claim the exemption for the child, and the noncustodial parent attaches this written declaration to his or her return.
2. A decree or agreement went into effect after 1984 and states the noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support.
3. A decree or agreement executed before 1985 provides that the noncustodial parent is entitled to the exemption, and he or she gave at least $600 for the child's support during the year. This is true unless the pre-1985 decree or agreement was modified after 1984 to specify that this provision will not apply.

Example 1. Under your 1984 divorce decree, your former spouse has custody of your child. The decree specifically states that you can claim the child's exemption. You provided $1,000 of your child's support during the year and your spouse provided the rest. You are considered to have provided over half the child's support. See item (3) above.

Example 2. You and your spouse provided all of your child's support. Under your 1988 written separation agreement, your spouse has custody of your child. Because the agreement was made after 1984, you are considered to have provided over half the child's support only if your spouse agrees not to claim the child's exemption by signing a written declaration. See item (1) above.

Written declaration. The custodial parent should use Form 8332, or a similar statement, to make the written declaration to release the exemption to the noncustodial parent. The noncustodial parent must attach the form or statement to his or her tax return.

The exemption can be released for a single year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. If the exemption is released for more than one year, the original release must be attached to the return of the noncustodial parent for the first year, and a copy of the release must be attached to the return for each succeeding taxable year for which the noncustodial parent claims the exemption.

Divorce decree or separation agreement made after 1984. If your divorce decree or separation agreement went into effect after 1984 and it states that you can claim the exemption for your child without regard to any condition, such as payment of support, you can attach a copy of the following pages from the decree or agreement instead of Form 8332.

1. The cover page (write the other parent's social security number on this page).
2. The page that states you can claim the exemption for your child.
3. The signature page with the other parent's signature and the date of the agreement.

If your divorce decree or separation agreement went into effect after 1984 and it states that you can claim the exemption for your child if you meet certain conditions, you must attach to your return Form 8332 or a similar statement from the custodial parent releasing the exemption.

Divorce decree or separation agreement made before 1985. If you are a noncustodial parent who claims a child's exemption under a decree or agreement made before 1985, you must give at least $600 for that child's support.

Child support. Child support payments received from the noncustodial parent are considered used for the child's support, even if actually spent on things other than support.

Example. Your 1982 divorce decree requires you to pay child support to the custodial parent and states that you can claim your child's exemption. The custodial parent paid for all support items and put the $1,000 child support you paid during the year into a savings account for the child. Because your payments are considered used for support, you are considered to have provided over half the child's support.

Back child support. If you fail to pay child support in the year it is due, but pay it in a later year, any payment of the overdue amount is not considered child support either for the year it was due or for the year in which it is paid. It is payment of an amount owed to the custodial parent, but it is not child support provided by you.

Example. You and your former spouse provide all your child's support. Your 1984 divorce decree requires you to pay $800 child support each year to the custodial parent and allows you to claim your child's exemption. Last year you paid only $500, but you made up the $300 you owed by paying $1,100 this year. The $300 back child support you paid this year is not considered support for last year or for this year.

Medical Expenses

A child of divorced or separated parents whose support test is based on the special rule described in this section is treated as a dependent of both parents for the medical expense deduction. A parent can deduct medical expenses he or she paid for the child even if an exemption for the child is claimed by the other parent.

Multiple Support Agreement

Sometimes no one individual provides more than half of the support of a person. Instead, two or more people, each of whom would be able to take the exemption but for the support test, together provide more than half of the person's support. One of those people can claim an exemption for that person if the requirements in Figure 2 are met.

Figure 2. Can You Claim an Exemption for a Dependent Under a Multiple Support Agreement?

Phaseout of Exemptions

The amount you can claim as a deduction for exemptions is phased out if your adjusted gross income (AGI) for 2001 falls within the range shown below for your filing status.

Filing Status	AGI
Single	$132,950 - $255,450
Married filing jointly or qualifying widow(er)	$199,450 - $321,950
Married filing separately	$99,725 - $160,975
Head of household	$166,200 - $288,700

If your AGI is more than the highest amount for your filing status, your deduction for exemptions is zero. If your AGI falls within the range, use the Deduction for Exemptions Worksheet in the instructions for Form 1040 to figure your deduction.

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