In: Economics
Disadvantages of the elimination of the personal exemption and paired with an expanded standard deduction, in President Trump's signature 2017 Tax Cuts and Jobs Act.
Prior to TCJA 2017, all taxpayers could claim a $ 4,050 personal exemption for themselves and their spouse or dependents. Personal exemptions reduced the gross income of a taxpayer and thus reduced his tax burden, this system was highly popular among families, mainly in the larger family. But the increase in the standard deduction described in TCJA 2017 will hurt these families, larger families may see an increase in their tax burden.
Prior to the TCJA, taxpayers could deduct $ 4,050 from their taxable income for each, their partner and each of their dependents.
If that family has a married couple with three children then it works out to $ 20,250 for them. Now also adding the standard deduction, which was $ 12,700 at the time, the total deduction for a married couple would be $ 32,505.
Now after the passage of the TCJA, there is no further personal exemption, so all couples can only claim the $ 24,400 standard deduction. This is $ 8,550 more income than before TJCA 2017. Thus, adopting standerd exemption in comparison to individual exemption in this tax reform will increase the large family tax burden.