If another person can claim you as a dependent on his or her tax
return, you cannot claim exemption from withholding if your income
exceeds $1,050 and includes more than $350 of unearned income (for
example, interest and dividends). See the discussion under Exemption from Withholding in Chapter 1 of Publication 505, Tax Withholding and Estimated Tax.
You can claim exemption from withholding for the current year only if both the following situations apply:
- For the prior year, you had a right to a refund of all federal income tax withheld because you had no tax liability, and
- For the current year, you expect a refund of all federal income tax withheld because you expect to have no tax liability.
