Categories: Taxes and Retirement

Losing the $4,050 Personal Exemption in 2018 But Doubling The Standard Deduction

As part of the GOP tax reform bill to support President Trump’s tax reform agenda the Personal exemption is being fully eliminated in 2018. The $4,050 personal exemption in 2018 (which was unchanged from 2017) can be taken for yourself, your spouse, and your eligible dependents, will be scrapped. This could mean that single parents or families with lots of dependents could see a higher tax bill as a result, while higher income filers with no kids/dependents will likely fare much better due to their ineligibility for this exemption (income limits) under current law and from the other offsetting tax breaks in the new tax bill.

Several itemized deductions like SALT and alimony payments are also being cut back or eliminated entirely. This is supposed to be offset by the near doubling of the standard deduction, higher income 2018 tax bracket thresholds and increased Child Tax Credit (CTC). The idea is that by increasing the standard deduction and removing several deductions and the personal exemption, tax payers will not need to itemize for claiming extra deductions in their 2018-19 tax returns thereby making the tax filing process simpler and smoother.

Note that the personal exemption was not able to be permanently scrapped by the GOP due to Senate rules but will be suspended until 2025, unless extended by Congress then.