Personal exemptions still exist, even though you can’t deduct them on your federal income tax return. Here’s why that matters.
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Among the sweeping changes made by the Tax Cuts and Jobs Act was elimination of the familiar deduction for personal exemptions. Yet the law didn’t actually repeal that deduction. Instead, it reduced the size of the deduction to zero. It can still be important to determine whether you qualify for personal exemptions, and if so, how many.
State taxes
One reason is that some states allow deductions for the number of personal exemptions you qualify for under federal law. Taxpayers in those states will continue to use federal rules to count those exemptions.
Qualifying relative
What’s more, for certain purposes on a federal income tax return we need to know whether you have a qualifying relative. If you aren’t married, a qualifying relative may allow you to file as a head of household, with more favorable tax rates that those whose filing status is single. Also, you may be able to claim the new $500 credit for a qualifying relative if the regular child tax credit is not available for that dependent.
A qualifying relative has to have gross income less than the dollar amount set for the personal exemption deduction. This requirement became problematic when Congress reduced the amount of the deduction to zero. Did that mean no one would qualify unless they have negative gross income?

The IRS realized that Congress didn’t intend this result. For purposes of determining whether you have a qualifying relative they’re going to continue treating the personal exemption amount as if Congress had not reduced it to zero. The dollar amount under prior law will continue to apply, with appropriate inflation adjustments. For 2023 it’s $4,700.
So the personal exemption remains as a ghost of its former self, not just as a definition, but as a dollar amount that can’t be deducted but may help you qualify for other tax benefits.
Official guidance: IRS Notice 2018-70