JofA Article
written by Sally P. Schreiber, J.D.
The Internal Revenue Service has issued proposed regulations explaining how taxpayers who qualify for the premium tax credit determine their family size for purposes of calculating the amount of the credit now that there is no personal exemption deduction from 2018 through 2025.
The IRS issued long-promised proposed regulations explaining how taxpayers who may qualify for the Sec 36B premium tax credit are affected by the temporary reduction of the personal exemption deduction under Sec. 151 to zero (REG-124810-19). The regulations replaced guidance issued in Notice 2018-84.
Under Sec. 151(d)(5)(B), the reduction of the exemption amount to zero in 2018 through 2025 is not taken into account in determining whether a personal exemption deduction is allowed or allowable, or whether a taxpayer is entitled to a deduction under Sec. 151. Even though the amount of the personal exemption deduction was reduced to zero by the law known as the Tax Cuts and Jobs Act, P.L. 115-97, taxpayers are still allowed personal exemption deductions under Sec. 151 for other purposes.
Sec. 36B allows a premium tax credit to eligible individuals who enroll themselves, their spouse, or any dependent in a qualified health plan through a federal health insurance exchange. The regulations under that section apply based on whether a taxpayer claimed a personal exemption deduction for an individual.
The proposed regulations adopt the substance of the guidance in Notice 2018-84, but the regulations clarify that the reduction of the personal exemption deduction to zero under Sec. 151(d)(5) does not affect the ability of individual taxpayers to claim the premium tax credit. They amend the definition of family in Prop. Regs. Sec. 1.36B-1(d) to provide that a taxpayer’s family means the taxpayer, including both spouses in the case of a joint return (except for individuals who qualify under Sec. 152 as a dependent of another taxpayer), and any other individual for whom the taxpayer is allowed a personal exemption deduction under Sec. 152(d)(5)(B) and whom the taxpayer properly reports on the taxpayer’s income tax return for that tax year.