Personal and dependent exemptions reduce your gross income. Every taxpayer may claim a personal exemption unless he or she may be claimed as a dependent on another taxpayer's return. In 2009, each personal exemption you claim reduces your taxable income by $3,650.

Exemptions decrease for taxpayers with AGI exceeding certain thresholds. To see if you qualify, click here. Under current law, the exemption phaseout is repealed over time. It is reduced by two-thirds for 2009 and eliminated altogether in 2010. In 2009, the exemption amount for taxpayers with AGI in excess of the maximum threshold is $2,433.

You may be able to receive an exemption for relatives if one of the following applies: (1) you pay more than half of their support, and they earn less than $3,650 annually; (2) they are younger than age 19, or (3) they are full-time students under age 24.

If several family members share the support of a relative but no individual pays more than half, then no individual may claim the relative as a dependent. Consider filing a multiple support agreement or designating one member to pay the majority of support and take the exemption.