I am on H1b and my wife is on B1 visa. Should I claim my wife as my dependent?

You CAN claim her as a dependent, but it is likely that you will get a better deal tax-wise if you file jointly with her and she CHOOSES to be treated as a resident alien for all of 2007.

This is especially true if you are the only source of income in the marriage, because you can use HER personal exemption and HER half of the double standard deduction to offset some of YOUR income.

If you want to file as Married Filing Separately and claiming exemption for your non-resident wife or file as Married Filing Jointly, in both the cases you need ITIN for your wife.

Filing as Married Filing Separately and claiming your wife as a dependent IS an option, but, for the life of me, I can see no tax advantage in doing so.