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.

View Comments (15)

  • Considering that currently about 72% of taxpayers file using the standard deduction, the near-doubling of the standard deduction, adjustments to the tax brackets, and doubling of the child tax credits in the GOP proposal will benefit many of that remaining 28% who do currently itemize. We've actually entered the numbers to see how it turns out for specific taxpayers -- It's difficult to come to any conclusion about the impact to a taxpayer without actually entering the data and seeing how it calculates out.

  • With so many single parent families today, the chance that they might be paying a higher tax bill hardly seems to be a good thing. With the hoops that many jump through to make ends meet, it doesn't seem
    reasonable that to "make it easier to file" would be a choice made if it meant higher taxes. A strong family
    has always been the underpinning of a strong country, yet this does not seem to help many families. Considering the falling birth rate, large families are an asset to the country.

    "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.

    This part of the bill is a big mistake if I understand what has been described in the paragraph. I hope there
    is some way that these families have some way to work around that increase.

  • Adolph, the loss of the personal exemption is offset by an increase in the child tax credit to $2000, so many of the single-parent families of which you speak should make out all right after all.

    • Unless that said child is under the age of 17, there is no benefit. 17 is usually 11th grade. That is not "making out all right".

    • One parent with two dependents. The deductions for 2017 would be head of household $9,350 plus three exemptions of $4,050 each. Equals $21,500 in deductions. For 2018 they lose the exemptions and the standard would be $18,000. Add back $2,000 for the two kids (2017 $1,000, 2018 $2,000) and you still have a deduction loss of $1,500. On a 15% tax rate and that's additional tax of about $200. This is a tax increase for everyone except those that are lower income with no dependents or income so high that they phase out of itemized anyways.

      • While I'm not a fan of the tax bill because it will ultimately increase the deficit, you're numbers are a bit off. The $2,000 that you added back for the two kids is a tax credit -- not to be confused with a tax deduction. In your example, of a 15% tax rate, each $1,000 of tax credit is equal to approximately $6,666 additional tax deduction. You would actually have a tax deduction of $31,332 instead of $21,500.

  • The current tax law states an individual can be claimed by the taxpayer if the taxpayer providers more than 50% of the individual's support AND the individual earns less than the standard exemption amount ($4,050). What will the new amount to be able to claim an individual who resides with you and is supported over 50% by you?

  • The bottom line is no group should not have to subsidize large families. If u do not want to pay more in taxes stop having multiple children and be responsible
    Nobody is stopping u from having a large family just no tax benefits for doing so

    • See this is the short sighted thinking that will end up hurting you more because of your immediate selfishness. Those children that you "don't want to subsidize" now will end up paying taxes and subsidizing everyone else in the future. Your 1.2 children will add less to the economy than their 5. People are so focused on their tiny little tree that they miss the redwood forest. To be clear I'm talking in relation to the loss of the exemptions that is only giving a proportional amount of tax savings for the number of people you are supporting. This is the exact thing that will end up most hurting those that Trump claims to be representing. You have a family that typically itemizes up to $19,000 and has three kids. After the changes they will end up losing $11,200 in deductions. For having three kids. Wow, they didn't plan that well *sarcasm*

      • I think you did the math wrong, above. The family that typically itemizes $19,000 will now get the standard deduction of $24,000, and increase of $5,000 in that area. They lose the three personal exemptions ($4050 X 3 = $12,150. So their net loss is: $12,150 - $5,000 = $7,150. Not nice, but not $11,200. Now how much of that is made up for with the revised brackets will vary from case to case.

  • I can't see how losing the exemption deduction and getting a 10K addditional allowance for the standard deduction will help anyone but the 2 person family. If they itemized they will get murdered with a straight loss of the number of exemptions allowed. a family of four would have to pay tax on $16,200 , how is that a tax break. If they have removed the exemption deduction it will suck for a lot of the middle class. I can see why the democrats say this law is crap but they agreed to it because it will kill Trump and the Republicans at the polls.

  • I'm at about 15,000 in itemized deductions including SALT (just under 10K), mortgage interest, donations. I do not have kids. Unless the tax brackets are going to wildly help me I don't see how losing the personal exemption won't leave me paying *more* in taxes in the end.

    • Welcome to the republican way of life... you will pay more and with all the cuts in state programs look fo an increase in sales tax


    • Did you read the article or know anything about the bill that was passed? The personal exemption was eliminated.