New Tax Law: Changes to the Personal Exemption

In this installment of my series on the implications of the Tax Cuts and Jobs Act, I will examine the personal exemption. 

The personal exemption for 2017 is a deduction of $4,050 per every dependent, including the taxpayer and the spouse. That personal exemption for 2018 through 2025 is going to be zero under the new tax law. The question may arise as to whether or not the dependency exemption for the children still needs to be addressed in a divorce. The short answer is yes. 

The allocation as to which parent is going to claim the children will still have bearing on which parent is going to claim the child tax credit — $2,000 per child under the age of 17, starting in 2018. By addressing the dependency exemption, even though there is no longer a dollar amount of a deduction on a personal return, you are still going to use that dependency exemption for the parents to know which of them gets to claim the $2,000 child tax credit. Whether or not it’s going to be beneficial can be reviewed on a case by case basis. 

It will also be important for divorcing families in which the children are still young enough to be dependents in 2026 to address this issue (in which a child in 2018 is nine or younger) since the personal exemption is scheduled to go back to an inflation-adjusted amount starting in 2026.         


Finally, I would like to address some inaccuracies I have seen in the media coverage of the personal exemption. It is often stated that the personal exemption was “repealed.” It was not repealed; the dollar amount was changed to zero. In other words, the personal exemption still exists, and it’s still relevant in families working through a divorce from 2018 through 2025.

Contact me with questions or comments today.

Susan A. Moussi, CPA, CFP®, CDFA SMD Tax & Divorce Financial Planning Consultants, Inc. Phone: 614.429.4172