Personal and dependent exemptions were tax deductions that allowed American taxpayers to reduce their taxable income for qualifying dependents, such as a child or relative.
However, starting in 2018, the Tax Cuts and Jobs Act (TCJA) set the exemption amount to zero through 2025. Despite this change, claiming a dependent can still qualify taxpayers for various tax credits and deductions.
From time to time, the question still comes up about whether taxpayers can claim dependent exemptions to reduce taxable income. Unfortunately, the answer is no. However, there are other credits that can be claimed, and here we give you a summary of seven alternatives to dependent exemptions and their requirements. While these credits exist, they’re a great way of reducing taxable income and helping families to stay on top of rising living costs.
What is a dependent?
A dependent is classified as a qualifying child or relative who relies on you for their financial support. The rules generally exclude your spouse as a dependent and anyone who has been claimed as a dependent on another tax return.
1. Child tax credit (CTC)
The purpose of the child tax credit is to help families with qualifying children to get a tax break, up to $2,000 per qualifying child. To be a qualifying child, your dependent must:
Be under the age of 17 during the tax year
Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece, or nephew).
Not provide more than half of his or her own support during the tax year. A dependent will need to meet the gross income test and other support tests.
Have lived in your home for more than half the tax year.
Be claimed as a dependent on your current tax return.
Be a U.S. citizen, U.S. National, or a U.S. resident alien.
Have a Social Security Number that is valid for employment and is issued before the due date of your tax return (including extensions).
The credit begins to phase out at $200,000 for single filing status and $400,000 for married couples filing jointly. Up to $1,700 of the credit is refundable, meaning you can receive this portion even if you do not owe tax.
After 2025, the CTC will be reduced to $1,000 unless there are further congressional approvals for family assistance.
If you feel you may be eligible for the Child Tax Credit and other tax benefits, get in touch with us. Our Senior Tax Associates can review your entire tax profile and help you claim all the tax credits and deductions that you are eligible for. If you’re a lower income earner and have dependents, the CTC can be of real benefit to you for tax relief.
If you don’t qualify for the CTC, you may qualify for the Credit for Other Dependents (ODC) for a child or dependent who is not a “qualifying child” for purposes of the Child Tax Credit.
2. Credit for other dependents (ODC)
This credit provides a non-refundable credit of up to $500 for dependents who don’t qualify for the CTC, such as older children or elderly parents. You can claim this credit in addition to the Child and Dependent Care Credit and the Earned Income Credit.
The phase-out thresholds are the same for the CTC: $200,000 for single filers and $400,000 for married couples filing jointly.
This credit can be claimed for:
Dependents of any age, even if they are older than 18 years old.
Dependents who have a Social Security Number or Individual Taxpayer Identification numbers.
Dependent parents or other qualifying relatives supported by you in the tax year.
Dependents living with you who are not your relatives.
Head of the household filing status is when you are the primary source of income for claimed dependents.
To qualify for this credit, you must claim the dependent on your tax return, and not claim the Child Tax Credit at the same time.
3. Additional child tax credit (ACTC)
The additional child credit is a refundable credit for taxpayers who don’t qualify for the full CTC. The ACTC can be used to clear what you owe to the IRS, but the government keeps any portion that’s left over.
In the current tax year, only $1,700 of unused Child Tax Credit money can be transferred to the refundable ACTC. That $1,700 is a significant portion (85%) of the $2,000 maximum Child Tax Credit available in these years.
4. Earned Income Tax Credit (EITC)
The EITC is a refundable credit for low to moderate-income working individuals and families, with the amount varying based on income and number of qualifying children. The EITC’s objective is to reduce the tax liability for Americans who need it most.
Income limits and credit amounts are adjusted annually, and taxpayers must meet specific adjusted gross income requirements in order to qualify. Two of these stipulations are:
Your investment income cap must be $11,950 for investment income earned in 2025.
You must not have to file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion.
5. Child and Dependent Care Credit
This credit is non-refundable for a percentage of expenses paid for the care of children to enable caregivers to work or look for work. This includes the costs of child care services, with the credit covering up to 35% of qualifying expenses, depending on income.
You may not claim this credit if someone else (for instance, your parents) lists you as a dependent on their tax return or if your filing status is married filing separately.
6. Education credits and deductions
An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return. If the credit reduces your tax to less than zero, you may get a refund. There are two education credits available: the American opportunity tax credit (AOTC) and the lifetime learning credit (LLC).
American opportunity tax credit (AOTC): Provides a credit for education expenses paid for an eligible student for the first four years of education. You can claim up to $2,500 per eligible student, with 40% of the credit (up to $1,000) being refundable.
Lifetime learning credit (LLC): Offers a credit for qualified tuition and related expenses for eligible students enrolled in eligible educational institutions. You can claim up to $2,000 per tax return.
Furthermore, you can claim a student loan interest deduction, which you claim as an adjustment to income. You may deduct the lesser of $2,500 or the amount of interest you actually paid during the year.
7. Medical expense deductions
If you incur medical expenses looking after your dependents, you can deduct the unreimbursed medical and dental expenses that exceed 7.5% of your adjusted gross income (AGI).
The deduction is eligible for payments for the diagnosis, cure, mitigation, treatment, or prevention of disease for yourself, your spouse, and any dependents.
Future Outlook
Tax credits and deductions are an important concession for families who earn lower incomes. For federal tax purposes, they can make a significant impact on the final income families retain. However, these limits change annually and the end of 2025 will mark the end or a reduction to many tax credits, previously tabled into law.
At the start of 2025, congressman Blake Moore, introduced the Family First Act, which will streamline antiquated federal tax policies into an enhanced Child Tax Credit for working families and new tax credit for pregnant mothers.
This act will significantly increase the child tax credit to $4,200 for children under 6 and $3,000 for children 6–17 years old. The proposal also introduces a $2,800 tax credit for pregnant mothers, recognizing that child care begins long before birth.
Discuss current and future tax credits, exemptions, and deductions with skilled tax professionals. At Hall Accounting Company, our team of tax associates are geared towards assessing your personal income tax situation and providing the guidance you need to reduce your tax liability and grow your personal wealth.