Premium tax credit unaffected by zero personal exemption
Proposed regulations redefine “family” for premium tax credit purposes to mean the taxpayer, spouse, and dependents listed on the taxpayer’s tax return.
Under the ACA, the premium tax credit (PTC) calculation is based on a taxpayer’s family size.
For PTC purposes, “family” means the individuals listed on the taxpayer’s tax return and for whom the taxpayer claims a personal exemption deduction. The TCJA reduced the personal exemption deduction to zero for tax years 2018 through 2025.
Proposed Treasury regulations clarify that the premium tax credit (PTC) is not affected by the zero exemption amount.
Following the passage of the TCJA, the IRS issued interim guidance in Notice 2018-84 providing that:
- A taxpayer is considered to have claimed a personal exemption deduction for any year that the taxpayer files an income tax return and does not qualify as a dependent of another taxpayer for that year.
- A taxpayer is considered to have claimed a personal exemption deduction for another individual if the taxpayer is allowed a personal exemption deduction for that individual and the taxpayer lists the individual’s name and TIN on the tax return.
The proposed regulations adopt the substance of Notice 2018-84 by amending regulations under §36B (relating to the PTC) and §6011 (relating to filing requirements) to clarify that the reduction of the personal exemption to zero does not affect the ability of individual taxpayers to claim the PTC.
Accordingly, the proposed regulations amend the definition of “family” in Reg. §1.36B–1(d) to mean the taxpayer (including both non-dependent spouses for joint returns) and any other individual for whom the taxpayer is allowed a personal exemption deduction under §152. Each of these individual’s names and TINs must be listed on the taxpayer’s tax return. , taxpayers must list dependents on their tax returns if they’re claiming the child tax credit or other dependent credit for them.
This definition of family applies to the advance PTC, the PTC reconciliation, and tax return filing requirements for those who receive the advance PTC.
Taxpayers may rely on the proposed regulations for any year in which the $0 exemption applies.