Final regulations define 'qualifying relative'

By Sally P. Schreiber, J.D.

The IRS on Wednesday issued final regulations under which the reduction in the personal exemption amount to zero for tax years 2018–2025 will not be taken into account in determining whether a person is a qualifying relative under Sec. 152(d)(1)(B) (T.D. 9913). The regulations finalize without substantive change proposed regulations (REG-118997-19) issued in June providing a definition of “qualifying relative” after the law known as the Tax Cuts and Jobs Act, P.L. 115-97, repealed the personal exemption deduction for the years 2018–2025.

Under the regulations, in defining a qualifying relative for purposes of various provisions of the Code that refer to the definition of a dependent in Sec. 152, including for purposes of the $500 credit for other dependents under Sec. 24(h)(4) and head-of-household filing status under Sec. 2(b), the exemption amount for 2018 is treated as $4,150 and, for 2019–2025, as the inflation-adjusted Sec. 152(d)(1)(B) exemption amount in the annual revenue procedure setting forth inflation-adjusted items. The inflation-adjusted amount is $4,200 for 2019 and $4,300 for 2020.

The final regulations generally apply to tax years ending after they are published as final in the Federal Register, except that Regs. Sec. 1.152-2(e) applies to tax years ending after Aug. 28, 2018, the date Notice 2018-70, which contains similar rules to the regulations, was issued.

Sally P. Schreiber, J.D., (Sally.Schreiber@aicpa-cima.com) is a JofA senior editor.

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