Fix The Tax Code Friday: Eliminating The Personal Exemption Amount

For more than 100 years, the Tax Code has allowed taxpayers to claim a personal exemption on their tax return. For federal income tax purposes, the exemption is treated as a deduction meaning that you can deduct the personal exemption amount from taxable income before you calculate the tax due. This was true even if you claimed the standard deduction on your tax return.

In 2017, a taxpayer could claim a personal exemption worth $4,050 for himself or herself, as well as the taxpayer’s spouse and dependents. Phaseouts applied, reducing the exemption amount by 2% for each $2,500 that a taxpayer’s adjusted gross income exceeded $261,500 for single taxpayers or $313,800 for married taxpayers filing jointly. You can see the 2017 numbers here.

As part of theTax Cuts and Jobs Act of 2017 (TCJA), the personal exemption was effectively eliminated by setting the amount to zero. To offset the loss of the exemption, the standard deduction amount has been doubled and the child tax credit has been expanded (more here). The change was part of an effort to make filing more simple.

This is not a permanent change. By statute, most individual provisions in the TCJA, like the repeal of the personal exemption amount, expire at the end of 2025.

That brings us to today’s Fix The Tax Code Friday question:

Should Congress set the personal exemption amount to zero permanently?

A quick note in case you’re new here: This is meant to be a discussion. While reasonable minds can differ, I ask that you keep your comments civil, on topic and clean. You can read more about my comment policy here.