A personal exemption is a deduction that section 151 of the Internal Revenue Code allows an individual in computing taxable income: one exemption for the taxpayer, one for a spouse where no joint return is made and that spouse has no gross income and is not another taxpayer’s dependent, and one more for each dependent (26 U.S.C. 151). Each of those exemptions is worth the exemption amount defined in section 151(d), and for a taxable year beginning after December 31, 2017 that amount is zero (26 U.S.C. 151(d)(5)(A)). The deduction is still in the Code, and on a federal return it is worth nothing.
The Exemption Amount, and Where the Zero Came From
The allowance provisions in subsections (a) through (c) carry no dollar figure. Subsection (d) supplies it, setting the exemption amount at $2,000 and indexing it for inflation, except as provided in paragraph (5) (26 U.S.C. 151(d)). Paragraph (5) is that exception.
Public Law 115-97 wrote that override in 2017 with a stop date in it. Section 70103 of Public Law 119-21, approved July 4, 2025, then struck “, and before January 1, 2026” from it and replaced the heading “2018 through 2025” with “beginning after 2017”, effective for taxable years beginning after December 31, 2024 (Public Law 119-21, section 70103). The zero itself now runs with no end date attached to it. What else that act changed for firm work is in what the One Big Beautiful Bill changed for accounting firms.
What a Zero Exemption Amount Still Decides
The Code stops the zero from spreading. For purposes of any other provision of the title, the reduction of the exemption amount to zero is not taken into account in determining whether a deduction is allowed or allowable, or whether a taxpayer is entitled to a deduction, under section 151 (26 U.S.C. 151(d)(5)(B)). Tests written on entitlement therefore still operate, which is why the qualifying surviving spouse status still turns on whether the taxpayer is entitled to a deduction under section 151, as qualifying surviving spouse sets out.
That subparagraph answers an entitlement question rather than an arithmetic one, and one test needs a live figure. A qualifying relative must have gross income below the exemption amount defined in section 151(d) (26 U.S.C. 152(d)(1)(B)). Read against a zero amount that test would reach almost nobody, so Treasury and the IRS issued regulations providing that in defining a qualifying relative the exemption amount in section 152(d)(1)(B) is $4,150 for taxable year 2018, and for taxable years 2019 through 2025 the inflation-adjusted amount set out in annual guidance published in the Internal Revenue Bulletin (26 CFR 1.152-2(e)). That regulation’s own window stops with taxable year 2025, while the Code’s zero now runs with no end date, so the figure for a later year comes from the annual revenue procedure (IRS, Rev. Proc. 2025-32), and the current amounts sit with the rest of the test in dependents. A preparer still needs an exemption amount in a year when nobody claims an exemption.
Where the Term Still Shows Up in Return Work
The face of the 2025 Form 1040 carries no exemption line. What survives is the Dependents block above the income section and the credits those entries feed (IRS, Form 1040 (2025)).
The word has not left the forms either. Form 8332 is still titled Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent (IRS, Form 8332 (Rev. December 2025)), and the IRS states that although the exemption amount is zero for tax year 2025, that release lets the noncustodial parent claim the child tax credit, the credit for other dependents or the additional child tax credit (IRS, Publication 501 (2025)).
One live deduction sits inside the same paragraph that sets the exemption amount to zero, at section 151(d)(5)(C), for each qualified individual, meaning the taxpayer if the taxpayer has attained age 65 before the close of the taxable year and, on a joint return, a spouse who has attained age 65 before the close of that year (26 U.S.C. 151(d)(5)(C)(ii)). It is not a personal exemption, and standard deduction carries it.
State Personal Exemptions Are Separate
A state personal exemption is a creature of that state’s own income tax law, and its amount does not follow the federal one. Virginia allows an exemption of $930 for the filer, for a spouse and for each dependent claimed on the federal return (Virginia Tax, Exemptions). Illinois builds its exemption allowance from a basic exemption amount of $2,050 plus a cost of living adjustment, which puts it at $2,925 per exemption for the tax year beginning January 1, 2026 (Illinois Department of Revenue, What is the Illinois personal exemption allowance?). Neither figure moves with the federal one, so those state returns still carry exemptions the federal return does not.
What It Gets Confused With
The standard deduction is the usual mix-up. It is a single deduction per return, built from a basic amount fixed by filing status plus an additional amount for age 65 or blindness (26 U.S.C. 63(c)(1)), while section 151 allows an exemption per person in computing taxable income (26 U.S.C. 151(a)). Only one of the two is currently worth a dollar.
If your firm runs more of these determinations in April than its reviewers can carry, you can test one of our preparers on your own work through a trial task.
