The Washington herald., 1921-01-11
Income Tax Facts
You Should Know
CHAPTER H.
CHAPTER II.

to which must be added the income
of dependent minor children. A
common error is for both husband
and wife to claim the exemption.
which is designed to cover essential
living expenses. This exemption
may be claimed by either or may be
appOrtioned between them as they
may elect.
or wife for the year 1920 was more
than 5000, each should file a sepa-
rate return. This is for the pur-
pose of computing correctly the
surtaX on income in excess of 5000,
which applies separately to the net
income OF husband and wife, and
not to the combined net income.
The surtaX rates, which apply only
to net income in excess of 5000, are
computed without benefit of the per-
sonal exemptions.
- Common Error.
Many taxpayers make the mistake
of computing tax on the combined
net income of husband and wife to
their own disadvantage. As an IL
lustration, in the case of a husband
whose net income was $1,000 and
that of his wife $4,000, the total
normal and surtax, if the incomes
were combined, would amount to
$3.50, whereas If computed on the
income of each would amount to
only $3.50. In the first instance, de-
Quoting the personal exemption of
$4,000 from the combined income of
$4,000, the tax is on the remaining
$1,000. At the rate of 4 per cent
On the first $4,000 and per cent on
income in excess of that amount
the normal tax amounts to $500.
The surtax, which is computed with
out the benefit of the personal ex-
emptiOn, amounts to $50, which is
l per cent on the amount of income
between $4,000 and $1,000, per cent
on the amount of income between
$4,000 and $4,000, and per cent on
the amount of income between S8,-
900 and $4,000.
If computed separately, the hus-
band may deduct the personal ex-
emption of $1,000 from his income
of $1,000 and on the remainder pay
a normal tax of s240, being per
cent on the first $4,000 and per
cent on the excess. His surtax
amounts to $50, being l per cent on
the amount of his income between
$4,000 and $4,000, and per cent on
the amount of his income between
$4,000 and $1,000. The Wife receives
no. personal exemption, and her en-
rate of 4 per cent being less than
$4,000. The husbands tax is 1910
and the wife's $50.
Exemptions Not For All.
Not every married person is en-
titled to the $4,000 exemption. The
claim is dependent upon whether
man and wife are living together
within the meaning of the revenue
act. In the absence of continuous
residence together, whether a man
or woman is living with wife or
husband depends upon the character
Of the separation.
If occasionally and temporarily
the wife is away on a visit or the
husband is away on business, the
Joint home being maintained, the
$4,000 exemption applies. Unavoid-
able absence of wife or husband
at sanatorium on account of ILL
ness does not preclude a claim for
the exemption. If, however, the
anu
ously makes his home at one place
and the wife at another. they are
not living together within the
meaning of the income tax laws, re-
gardless of their personal relations.
In case of separation by mutual
agreement, each must make@a re-,
turn of income of $1,000 or more.
The same rule applies in case <of
divorce or legal separation. A maid
or widow not the head of a family
and without dependents is entitled
only to $1,000 exemption.
How to Denne Status.
The status of a taxpayer on the
last day Of the taxable year deter
mines the amount of his exemptions
II on December 81, 1920, he was
married and living with his wife
he may claim TIE $4,000 exemption,
although the marriage ymay have
taken place on December 80. If
on December 80 he became a widow
er he is entitled only to the $1,000
allowed a single person unless the
head of family.