Personal Exemptions and Healthcare Related Provisions

Many people are not aware that a law, called the Tax Cuts and Jobs Act, has recently reduced the personal exemption deduction under Section 151 to zero. Due to this change, it is very important for any taxpayers who are eligible or who think they may be eligible for the premium tax credit or the shared-responsibility payment to determine their status.   

While the reduction of the exemption amount to zero will affect some people, it’s also important to note that taxpayers are still eligible for personal exemption deductions for other purposes under Sec. 151.

For example, Section 36 B allows for a premium tax credit for eligible people who become enrolled in a qualified health plan through a federal health insurance exchange. This credit also applies to people who enroll their spouses or any dependents in a qualified health plan as well.

Also, taxpayers will have claimed a personal exemption deduction if they file an income tax return for the year and don’t qualify as another taxpayer’s dependent. This is also the case if a taxpayer is allowed a personal exemption deduction for an individual other than the taxpayer and lists that person and his or her taxpayer identification number on Form 1040 or 1040NR.

While all of these laws and rules hold true for 2018, the IRS has plans to amend these regulations in the future. The plan is to clarify what “claiming a personal exemption” means for tax years in which the exemption is zero. However, it does not currently have plans to amend the Sec 500A regulations.

If you are having trouble navigating or understanding this information and if and/or how it affects you, remember that you can always seek advice from a qualified tax professional.