The premium tax credit and individual shared responsibility payment rules turn on who can claim or be claimed for a personal exemption. Historically, personal exemptions have been claimed as a deduction on a taxpayer’s annual return. The Tax Cuts and Jobs Act suspended the ability of taxpayers to claim the personal exemption deduction for tax years 2018 through 2025. The Act does make it clear, however, that individuals can still qualify to claim a personal exemption where that is relevant for other tax purposes.
Claiming a Personal Exemption Without Claiming the Deduction
The IRS has provided that for purposes of the premium tax credit and shared responsibility payments, a taxpayer is considered to have claimed a personal exemption deduction—
– for him or herself for a tax year, if the taxpayer files an income tax return for the year and does not qualify as a dependent of another taxpayer for the year; and
– for an individual other than the taxpayer, if the taxpayer is allowed a personal exemption deduction for the individual and lists the individual’s name and TIN on the Form 1040, U.S. Individual Income Tax Return, or Form 1040NR, U.S. Nonresident Alien Income Tax Return, the taxpayer files for the year.
Premium Tax Credit and Tax Return Regulations to be Clarified
Premium tax credit, individual mandate and income tax return regulations seem to assume that claiming an exemption is the same thing as claiming the deduction. The IRS and Treasury Department intend to clarify the premium tax credit and tax return filing regulations to clarify the application of exemption rules. Regulations likely to be affected include Reg. §§1.36B-1(d), 1.36B-2(c)(4), 1.36B-4(a) and 1.6011-8(a). Individual shared responsibility payments cease for months after December 31, 2018, and therefore those regulations will not be amended. Taxpayers can simply follow this guidance.
Code Sec. 36B
CCH Reference – 2018FED ¶4197.20
Code Sec. 5000A
CCH Reference – 2018FED ¶34,963.15
Code Sec. 6011
CCH Reference – 2018FED ¶35,141.70
Tax Research Consultant
CCH Reference – TRC HEALTH: 3,100
CCH Reference – TRC HEALTH: 3,300