Suspension of Personal/Dependency Exemptions for 2018 to 2025
The personal and dependency exemptions have been suspended for 2018 to 2025. Technically, for those years the exemption amount is zero.
The federal government takes into account a taxpayer's family obligations by allowing an exemption for each family member. Exemptions reduce the amount of a taxpayer's income on which tax is computed. A taxpayer can generally deduct $4,050 (for 2017) for each exemption claimed. (Personal and dependency exemptions are phased out for individuals at higher levels of income.) Generally, a taxpayer is allowed one exemption for himself or herself and one exemption for a spouse. A taxpayer is also allowed additional exemptions for each qualifying dependent. Generally, a qualifying dependent is a person who is related to and supported by the taxpayer (e.g., the taxpayer's children).
However, there are many rules (and exceptions to the rules) regarding when a taxpayer can claim an exemption. For example, a taxpayer may be unable to claim an exemption for a spouse or a dependent who is not a U. S. citizen or resident. Because members of the U.S. Armed Forces are often stationed outside the United States, these rules may be of particular importance to you.
Citizenship Status Definitions
Before we begin this discussion, it may be helpful to define (for tax purposes) the following terms:
- U.S. citizen: A person who was either born in the United States, or is the child of at least one U.S. citizen parent, or who has been naturalized in the United States. A naturalized U.S. citizen is someone who was born outside the United States of non-U.S. citizen parents but who has lawfully become a U.S. citizen.
- Resident alien: A person who meets the green card test or the substantial presence test. A person meets the green card test if he or she holds an immigrant visa (also known as a green card). A person meets the substantial presence test if the person is physically present in the United States for 31 days during the current calendar year, and 183 days during the current year plus the 2 preceding years, counting all the days of physical presence in the current year, but only 1/3 the number of days of presence in the first preceding year, and only 1/6 the number of days in the second preceding year.
- Nonresident alien: A person who is not a U.S. citizen and does not meet either of the tests to be a resident alien.
- Dual status alien: A person who is both a resident alien and a nonresident alien during the same tax year.
Your Own Exemption
You can take one exemption for yourself (regardless of your citizenship status) unless you can be claimed as a dependent by another taxpayer. If another taxpayer is entitled to claim you as a dependent, you cannot take an exemption for yourself. This is true even if the other taxpayer does not actually claim your exemption.
Your Spouse's Exemption
On a joint return, you can claim one exemption for yourself and one for your spouse. If you file separate returns, you can claim the exemption for your spouse only if your spouse had no gross income and was not the dependent of another taxpayer. This is true even if the other taxpayer does not actually claim your spouse's exemption. This is also true if your spouse is a nonresident alien.
Tip: If your spouse died during the year, you can generally claim your spouse's exemption under the rules explained above. If you remarried during the year, you cannot take an exemption for your deceased spouse.
Tip: If you obtained a final decree of divorce or separate maintenance by the end of the year, you cannot take your former spouse's exemption. This rule applies even if you provided all your former spouse's support.
Nonresident Alien Spouses With Income
If your nonresident alien spouse earned income, he or she can be treated as a resident alien for tax purposes if all the following conditions are met:
- You're either a U.S. citizen or a resident alien at the end of the tax year
- You're married to the nonresident alien at the end of the tax year
- You both choose to treat the nonresident alien as a resident alien for tax purposes
If you both choose to treat the nonresident alien spouse as a resident alien, this choice will apply to all later tax years unless you or your spouse revoke it, you or your spouse die, or you become legally separated under a divorce decree or separate maintenance agreement. In some cases the IRS may end the choice because of inadequate records. If the choice is ended for any of these reasons, neither you nor your spouse may make the choice again for any later tax year.
Caution: Once you make this choice, the nonresident alien spouse's worldwide income is subject to U.S. tax. If he or she has substantial foreign income, there may be no advantage to making this choice. If he or she has little or no income, however, making this choice may reduce your tax liability.
If the nonresident alien spouse isn't treated as a resident alien, you and your spouse may not file a joint tax return. You may file as married filing separately or (if you qualify) head of household.
Exemptions for Dependents
The Dependency Tests
You are generally allowed one exemption for each person you can claim as a dependent. To claim a dependency exemption, you must first have a "qualifying child" or a "qualifying relative." Then, you must meet three tests, described below. For more information on the dependency exemption in general, see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. There are five tests that must be met for a child to be considered your qualifying child for purposes of the dependency exemption (in most cases, only the first four are relevant): (1) relationship test, (2) age test, (3) residency test, (4) support test, and (5) special test for qualifying child of more than one person.
If you don't have a qualifying child, you may be able to claim a dependency exemption if you have a qualifying relative. There are four tests that must be met for a person to be considered your qualifying relative for purposes of the dependency exemption: (1) not a qualifying child test, (2) member of household or relationship test, (3) gross income test, and (4) support test. Once you've determined you have a qualifying child or a qualifying relative, you must meet three additional tests in order to take the dependency exemption: (1) the dependent taxpayer test, (2) the joint return test, and (3) the citizen or resident test.
- Dependent taxpayer test — If another person could claim you as a dependent, then you can't claim anyone else as a dependent. This is true even if you have a qualifying child or qualifying relative. Similarly, if you are filing a joint return and your spouse could be claimed as a dependent by someone else, then you and your spouse can't claim any dependents on your joint return.
- Joint return test — You can't claim an exemption for a dependent who files a joint return. For example, assume you support your daughter for the entire year while her husband is in the armed forces, and the couple files a joint return. Even if your daughter is a qualifying child, you can't claim an exemption for her.
- Citizen or resident test — The dependent must be a U.S. citizen, U.S. resident, or U.S. national, or must be a resident of Canada or Mexico for some part of the year.
Claiming Dependency Exemptions for Individuals Living Abroad
Children are usually considered to be citizens or residents of the country (or countries) of their parents. If you were a U.S. citizen when your child was born, your child may be a U.S. citizen even though the other parent is a nonresident alien and your child was born in a foreign country. If so, you may claim a dependency exemption for the child if the child meets the other dependency tests.
It doesn't matter that the child may live abroad with the nonresident alien parent. In such instances, the crucial test to meet may be the support test. You can authorize an allotment from your military pay for the support of a dependent. The amount of the authorization is considered as provided by you in figuring whether you provide more than half the dependent's support.
Example(s): You are a U.S. citizen in the U.S. Army. While you were stationed in Japan, you had a son with a woman who is a Japanese citizen. Your son has dual (U.S. and Japanese) citizenship. Later you were relocated to a new permanent duty post in the United States. At that time you authorized an allotment from your military pay that has provided half your son's support. As a result, you may claim a dependency exemption for your son on your tax return.
If the allotment you provide is used to support persons other than the one(s) named in the allotment authorization, you may also claim dependency exemptions for those other persons if they otherwise qualify as your dependents. (In the above example, your allotment also provides half the support for your son's mother. However, you cannot claim a dependency exemption for her because she isn't a U.S. citizen or resident.)
Claiming an Adopted Child Who Isn't A U.S. Citizen or Resident
If you're a U.S. citizen and you legally adopt a child who is not a U.S. citizen or resident, you can claim a dependency exemption for that child if all of the following are true:
- The other dependency tests are met
- The child had your home as his or her main home for the year
- The child was a member of your household for the year
Example(s): You are a U.S. citizen and have been in the U.S. Army for 16 years. You're stationed in Germany. You and your wife, a German citizen, have a 2-year-old son who was born in Germany and who has dual (U.S. and German) citizenship. Your wife also has a 12-year-old daughter from a previous marriage; the girl, a German citizen, lives in your household as her main home, but you have not adopted her. Because your son can be considered a U.S. citizen, you may claim a dependency exemption for him. You cannot claim a dependency exemption for your stepdaughter, however, because you have not adopted her and she doesn't meet the U.S. citizen or resident dependency test.
If Your Child Is In the Armed Forces
Generally, a taxpayer can't claim a dependency exemption for a child who is in the Armed Forces or who has attended one of the Armed Forces academies (e.g., the Air Force Academy) for the entire year because the taxpayer won't have met the support test for the year. However, if your child receives only partial support from the Armed Forces, you can claim the dependency exemption if you provide more than half the child's support and the other tests are met.
Example(s): Your daughter is 18 and single. She graduated from high school in June and entered the U.S. Air Force the following September. She provided $4,400 (her wages of $3,400 and $1,000 for other items provided by the Air Force) for her own support that year. You provided $4,100. You can't claim a dependency exemption for her because you didn't provide more than half her support.
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