💡 No More Personal Exemptions? Why That’s Good News for Dependents with Jobs

When the Big Beautiful Bill (BBB) was signed into law on July 4, 2025, it made permanent a number of tax changes first introduced in 2017. One of the quietest—yet most impactful—provisions was the permanent elimination of personal exemptions from the tax code.

At first glance, that might sound like bad news—after all, taxpayers used to claim thousands of dollars in deductions for themselves and their dependents. But there’s a surprising upside, especially for families with working teens and college students:

Dependents can now earn more income before they’re required to file a tax return.

🧾 A Quick Recap: What Were Personal Exemptions?

Before 2018, taxpayers could deduct about $4,050 per person—for themselves, their spouse, and each dependent. However, dependents couldn’t claim that exemption on their own returns. Instead, it was claimed by the parent or guardian.

This meant that dependents had a much lower income threshold before the IRS required them to file a return, because they didn’t get to use a full standard deduction.

✅ What the BBB Changed (Permanently)

The BBB:

• Eliminated personal exemptions permanently starting in tax year 2025.

• Kept and modestly increased the standard deduction.

• Allowed all taxpayers—including dependents—to take the full standard deduction, regardless of who claims them.

As a result, dependents now get to keep more of their income tax-free, and in many cases, won’t need to file a federal return at all.

📊 2025 Filing Thresholds for Dependents

Thanks to the BBB changes, dependents can now earn up to the full standard deduction amount before needing to file:

• $14,600 (2025 est.) in earned income (like wages from a summer job)

• Compare this to prior years when dependents were often required to file after earning just $7,000–$9,000

That’s nearly $5,000–$7,000 in extra tax-free income each year before any filing requirement kicks in.

👩‍🎓 Example: Meet Emma, a High School Senior

Emma works part-time during the school year and picks up a full-time summer job. She earns $13,500 in 2025. Her parents still claim her as a dependent.

Under old exemption rules (pre-2018):

• She would have been required to file a tax return with as little as $7,000 in income.

• She couldn’t claim a personal exemption, because her parents already did.

Under the BBB rules:

• Emma can now claim the full standard deduction.

• She doesn’t need to file at all—unless she wants a refund of withheld taxes.

🔁 Other Benefits of the Change

• Simplified filing: Fewer dependents with low income are required to file returns.

• Less tax prep burden: Families avoid unnecessary returns for dependents earning below the threshold.

• Strategic planning: Dependents can work more without triggering a tax filing requirement, encouraging financial independence.

⚠️ A Few Things to Watch For

• If your dependent has unearned income (like dividends or interest), different rules apply—this is the "kiddie tax."

• If any federal withholding was taken from paychecks, filing a return is the only way to get that money back.

• Dependents with self-employment income over $400 still need to file—even if total earnings are low.

🧠 Final Thoughts

The elimination of personal exemptions under the BBB might seem like a loss on the surface—but for families with working dependents, it's actually a win.

By allowing dependents to claim the full standard deduction, the BBB lets kids and students earn more money tax-free, reduces filing complexity, and helps promote financial literacy without tax burdens.

Want to understand how these changes impact your family’s tax situation? Let’s schedule a strategy session and make the most of every dollar—no matter who earns it.