Schedules B and D Excess Exemptions

If your allowable exemption amounts are greater than your Total Income (Form 1, Line 10 or Form 1-NR/PY, Line 12), you can deduct the difference from the income you report on Schedule B and Schedule D.

Claim your exemptions in the following order:

Against Schedule B income after: Deductions for allowable excess trade or business deductions Short-term capital losses Unused long-term capital losses and 50% long-term capital gains deduction (for collectibles and pre-1996 installment sales). The excess exemptions are first applied against adjusted gross interest and dividends and then against adjusted gross capital gains

Against Schedule D income after: Netting long-term gains and losses Applying any excess Schedule D losses against Schedule B income Deducting excess Schedule B losses, and Deducting allowable excess trade or business deductions

You can't carry forward any remaining excess exemptions to the next tax year. Married filing separate taxpayers may not claim excess exemptions either.

To determine if you qualify for excess exemptions:

If you're a resident , and your total exemption amount (Form 1, Line 18) is more than your income after deductions (Form 1, Line 17) - Complete the "Schedule B, Line 36 and Schedule D, Line 20 Worksheet" section on page 12 of the Form 1 Instructions

If you're a nonresident or part-year resident and your total exemption amount (Form 1-NR/PY, Line 22) is more than your income after deductions (Form 1-NR/PY, Line 21) - Complete the "Schedule B, Line 36 and Schedule D, Line 20 Worksheet" section on page 16 of the Form 1-NR/PY Instructions

To report the exemption on your tax returns:

Enter the amount from Line 5 of the worksheet on Schedule B (Line 36), and enter the amount from Line 8 of the worksheet on Schedule D (Line 20)