Tax Cuts and Jobs Act Suspends Personal Exemption Deduction

SECURE Act

Written by Curt Bach

January 9, 2018

The Tax Cuts and Jobs Act has suspended the personal exemption deduction.

Current Law

Through December 31, 2017

In determining taxable income, an individual is allowed to reduce Adjusted Gross Income (AGI) by any personal exemption deductions. Personal exemptions are generally allowed for the taxpayer, spouse, and any dependents. For 2017, the inflation-adjusted personal exemption is $4,050 per person.

New Law

Effective for tax years beginning after December 31, 2017, and before January 1, 2026

The personal exemption will be suspended ($0 per person) for tax years beginning after December 31, 2017, and before January 1, 2026; for tax years 2018-2025.

Commentary

Filing requirements for individuals will be based solely on the standard deduction for tax years 2018-2025 since the personal exemption will be suspended. Also, due to changes to the standard deduction, personal exemptions, and tax credits, it is expected that Federal-withholding tables for wages will be updated in early 2018. This will impact net paychecks for many employees. It is recommended that employees revisit their withholding allowances in early 2018 as well.

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Curt Bach
I joined Hawkins Ash CPAs in August 2010, and am currently a manager in the firm’s Medford office. I provide a variety of tax services, including trust and estate tax preparation and planning. I have more than nine years of experience providing audit and tax services to nonprofit organizations, governmental entities and small businesses. I am a member of our firm’s tax committee and not-for-profit service group.

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