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.