Individual taxpayers are allowed to reduce their adjusted gross income by specific amounts which are referred to as personal exemptions. Every year the amount of the exemption differs due to inflationary purposes. These exemptions ultimately help reduce the adjusted gross income, which ultimately reduce the taxable income. Dependents and spouses can claim an exemption each. These exemptions are designed so that the taxpayer is relieved of paying more taxes since he/she has the financial responsibility of taking care of the dependent or spouse.
Example:
These exemptions increase per dependent. If Joe is a single parent and has two dependents, Joe is entitled to three exemptions.