The Tax Cuts and Jobs Act (TCJA) passed late 2017 has brought with it some significant changes to both personal exemptions and standard deduction for tax years 2018 through 2025 which are outlined below.
No More Personal Exemptions
By and large personal tax exemptions and the standard deduction have looked the same for quite some time. However, with the passage of the Tax Cuts and Jobs Act (TCJA) many individual taxpayers may find themselves confused by the changes.
For 2017, taxpayers can claim a personal exemption of $4,050 each for themselves, their spouses and any dependents. If they choose not to itemize, they can take a standard deduction based on their filing status: $6,350 for singles and separate filers, $9,350 for head of household filers, and $12,700 for married couples filing jointly.
For 2018 through 2025, the TCJA suspends personal exemptions but roughly doubles the standard deduction amounts to $12,000 for singles and separate filers, $18,000 for heads of households, and $24,000 for joint filers. The standard deduction amounts will be adjusted for inflation beginning in 2019.
For some taxpayers, the increased standard deduction could compensate for the elimination of the exemptions and possibly even provide some additional tax savings. But for those with many dependents or who are used to itemizing deductions, these changes could result in a higher tax bill — depending in part on the extent to which they can benefit from family tax credits.