A loophole was repealed—at least temporarily—by the Tax Cuts and Jobs Act (TCJA) in 2018. You won’t be able to claim your spouse as a dependent in any respect as long as the TCJA remains in effect through 2025, or even longer if the TCJA is renewed at that time. But you might still have time to go back and amend a prior year’s return.
The Loophole Before the TCJA
A dependent is someone who meets the criteria for being either a “qualifying child” or a “qualifying relative.” A taxpayer could claim that individual’s personal exemption on their tax return to reduce their taxable income through 2017. That created a loophole in the rule that you can’t claim your spouse as a dependent. But you could realize a financial break regardless, at least until the TCJA went into effect. You used to be able to claim your spouse’s personal exemption under some circumstances. This worked out to more or less the same as claiming them as a dependent, at least until the TCJA eliminated personal exemptions from the tax code effective 2018.
Claiming the Exemption on a Joint Return
If you filed a joint married return, you and your spouse would have reported your combined incomes on the same tax return. You could then have claimed two personal exemptions, at least through 2017: One for each of you, even if only one of you earned income. But filing a joint return requires the mutual consent and signatures of both spouses, so there might be circumstances under which spouses were unable or unwilling to file jointly. A spouse might have been incapacitated and unable to give their consent and sign the return, or perhaps the tax impact was more advantageous when spouses filed separate returns.
Filing a Separate Married Return
You could also claim your spouse’s personal exemption in years when it was available without filing a joint return, but only if you met four qualifying rules:
You filed a separate married return.Your spouse had zero gross income for the year.Your spouse didn’t file a tax return of their own.Your spouse was not the dependent of another person, regardless of whether the other person actually claimed them.
Filing as Head of Household
You must meet the IRS criteria for being “considered unmarried” on the last day of the tax year to qualify as head of household. This means that your spouse couldn’t have lived with you at any time during the last six months of the tax year, from July 1 onward, if you were still legally married. You must have paid more than half the costs of maintaining your home. You must have had a qualifying dependent other than your spouse. Your spouse might have had zero gross income in 2017 because they were away at graduate school and didn’t work all year, nor did they have any income-producing investments. You could claim their personal exemption if they didn’t file their own tax return for that year and if they couldn’t be claimed as a dependent by any other taxpayer. But they must have moved onto campus before June 30 for you to qualify as head of household. They must not have intended to ever return to your home. It must have been their intention to remain living apart from you indefinitely. Additionally, you must have paid for more than half your residence’s expenses and must have had another dependent.
When Your Spouse Is a Nonresident Alien
A similar set of rules applies if your spouse is a nonresident alien. You could have qualified as head of household under these circumstances and claimed your spouse’s exemption if your spouse:
Had zero gross income for U.S. tax purposes.Did not file a U.S. tax return.Was not the dependent of any other person.
Filing an Amended 2017 Return
You had the option to go back and amend your 2017 tax return to take advantage of this tax loophole if you don’t want to wait until 2026 until the TCJA potentially expires and personal exemptions are potentially reinstated in the tax code. Unfortunately, your deadline to do so has probably expired. You have three years to file Form 1040-X, the amended federal tax return, beginning with the date you filed your original return. This means that the last day to amend your 2017 tax return would have been Tax Day 2021 if you filed your 2017 return on Tax Day 2018. This would have been extended to the October deadline if you asked for a six-month extension of time to file, but that deadline has passed as well. But here’s a catch: You have two years from the date you paid any taxes due on that 2017 tax return, whichever is later. If you paid on that 2017 tax return by installment agreement with the IRS, you might not have made your final payment under that agreement until sometime in 2020 or even later. You would then have until the two-year anniversary of that date in 2022 or later to amend your return. Your deadline is whichever date occurs last.
