Personal Exemption

A personal exemption is the deduction section 151 of the Internal Revenue Code allows for the taxpayer, the taxpayer's spouse on a joint return, and each dependent, equal to an "exemption amount" multiplied by the number of exemptions. Strictly, the exemption for a dependent is the dependency exemption, but "personal exemptions" commonly refers to all of them, which is how the statute's own heading uses it.

For any tax year beginning after December 31, 2017, section 151(d)(5)(A) says "The term 'exemption amount' means zero." The Tax Cuts and Jobs Act set that rule through 2025, and the One Big Beautiful Bill Act of 2025 made it permanent. The deduction still exists on paper; it is simply worth nothing on a federal individual return.

What it used to do. Before 2018 the personal exemption worked alongside the standard deduction: a married couple with two children took four exemptions, each worth the year's indexed amount ($4,050 in 2017, under Revenue Procedure 2016-55), and higher-income households lost part or all of the total through a phase-out. The 2017 tax law paired the change with a larger standard deduction and a larger child tax credit, plus a new credit for other dependents.

Why the term still matters. Section 151(d)(5)(B) says the reduction to zero "shall not be taken into account in determining whether a deduction is allowed or allowable". That sentence keeps a long list of other rules working, because many provisions are written in terms of whether a person is someone for whom a section 151 deduction is allowed:

• Dependents. Who is your dependent is still decided under section 152, and that answer drives the child tax credit, the credit for other dependents, head of household status and more.
• Form 8332. A custodial parent can still release "the claim to exemption" for a child on Form 8332, letting the noncustodial parent claim the child for the child tax credit, even though the exemption itself is worth zero.
• Health coverage credits. The premium tax credit counts family size by the individuals for whom the taxpayer is allowed a section 151 deduction.
• The senior deduction. The One Big Beautiful Bill Act placed the $6,000 deduction for people 65 and older, available for 2025 through 2028, inside section 151(d)(5)(C), but it is a separate deduction, not a revived exemption.

Estates and trusts. Section 642(b) gives estates and trusts a deduction "in lieu of" the personal exemption, and it was never set to zero: $600 for an estate, $300 for a trust required to distribute all its income currently, $100 for other trusts, and, for a qualified disability trust, an inflation-indexed amount that started at $4,150 for the years the individual exemption is zero. These small amounts matter in computing a trust's taxable income and its distributable net income.

State returns. States set their own rules, and some still use a personal exemption or a credit in its place, sometimes keyed to the federal count. In Virginia, Va. Code § 58.1-322.03 allows a $930 deduction "for each personal exemption allowable to the taxpayer for federal income tax purposes", plus an additional $800 exemption for each "blind or aged taxpayer", which only works because federal law still treats exemptions as allowable.

1. Count the exemptions. One for the taxpayer, one for a spouse on a joint return, and one for each person who qualified as a dependent under section 152.

2. Multiply by the exemption amount. For tax years beginning after 2017 that amount is zero, so the federal deduction is zero.

3. Keep the count anyway. Dependency still determines credits, filing status and state deductions, and a state may multiply the federal count by its own amount.

For example, a married couple with two children filing in 2017 claimed four exemptions of $4,050 each, a $16,200 deduction before any phase-out. Filing for 2026, the same family's federal exemption deduction is $0. On a Virginia return, the four exemptions allowable for federal purposes are each worth $930, a $3,720 deduction on the state return.

Pros

• Zeroing the exemption, together with a larger standard deduction and child tax credit, removed a per-person calculation and its phase-out from the federal return.
• Keeping the exemption on the books preserved the dependency framework, so rules that cite section 151 did not have to be rewritten.
• Estates and trusts kept their small section 642(b) deduction.

Cons

• Large families lost a deduction that scaled with household size, and the replacement credits do not track it exactly.
• A deduction that is allowed but worth zero is confusing: forms and rules still refer to exemptions that save no federal tax.
• State returns may still depend on the federal exemption count, so the concept has to be understood even though it no longer changes federal tax.