State Personal Exemptions and Dependent Credits (2026)

Why State Personal Exemptions Still Exist (After Federal Suspended)

The federal personal exemption was $4,050 per filer plus $4,050 per dependent in tax year 2017. The Tax Cuts and Jobs Act of 2017 suspended the federal personal exemption (set to $0) for tax years 2018 through 2025, and instead approximately doubled the federal standard deduction. The federal MFJ standard deduction rose from $12,700 in 2017 to $24,000 in 2018 (and inflation-indexed since), while the personal exemption disappeared.

States are not bound by federal personal exemption suspension. State personal exemptions are set by state legislation and continue to exist where the state legislature has not removed them. Around 21 states plus DC maintain personal exemptions in 2026, with mechanics and dollar amounts varying widely. Some states use exemptions exclusively (NJ, OH); some use exemptions in combination with standard deductions (GA, MI, AL); some have shifted from exemptions to credits (CA, NY); some have eliminated exemptions in favour of larger standard deductions (federal-conforming states like CO, AZ, MO, etc.).

Per the Tax Foundation 2024 state-tax-conformity report, state-level personal exemption decisions are politically charged and reflect state-specific revenue and equity considerations. The trend from 2018 through 2026 has been a slow drift away from exemptions toward larger standard deductions and refundable credits, though many states still maintain the exemption mechanism unchanged.

States With Personal Exemptions in 2026

Per-filer and per-dependent amounts, plus state child tax credit or earned income tax credit if applicable. Excluded: states with no income tax (AK, FL, NV, NH, SD, TN, TX, WA, WY) and states where the standard deduction has fully replaced the exemption mechanism.

Sources: each state's 2026 Department of Revenue published instructions; Tax Policy Center state EITC tracker; Center on Budget and Policy Priorities state child credit tracker. Phase-out thresholds and refundability rules vary; check the relevant DOR before filing.

State Child Tax Credits: A Different Mechanism

A growing number of states have implemented refundable state child tax credits, separate from federal CTC and from state personal exemptions. The state CTC is a direct dollar-for-dollar reduction in state tax owed, often refundable (paid out as a refund even when state tax owed is zero).

California offers the Young Child Tax Credit ($1,083 max for filers with qualifying children under 6 and earned income within Earned Income Tax Credit ranges). New York offers the Empire State Child Credit ($330 to $1,100 per qualifying child, depending on age and income). Colorado offers a refundable state CTC for low-income filers under HB 1311 (2023). Minnesota offers the Working Family Credit and CTC (combined). DC, Maryland, New Jersey, New Mexico, Vermont and a handful of other states offer state CTCs in various forms.

For a low-income working family with children, the stacked benefits across federal CTC + state CTC + federal EITC + state EITC + state personal exemption + state dependent credit can be substantial. A two-child working family at $35,000 income in California can receive several thousand dollars in combined federal-and-state child-related tax benefits, of which a meaningful portion comes from California-state-specific credits.

State Earned Income Tax Credits

Around 30 states plus DC offer a state-level earned income tax credit, generally calculated as a percentage of the federal EITC. Per the Center on Budget and Policy Priorities state EITC primer, the rates have crept upward over the past decade, with several states adding refundability or expanding age-eligibility (CA expanded its CalEITC to filers as young as 18 in 2018).

The most generous state EITCs in 2026 are:

• DC: 50% of federal EITC, refundable
• Maryland: 45% refundable (Maryland EITC)
• Massachusetts: 40% refundable
• Vermont: 38% refundable
• New Jersey: 40% refundable (since 2023 expansion)
• New Mexico: 25% refundable (Working Families Tax Credit)
• California: variable CalEITC using state-specific calculation, generally 30-85% of federal at lower incomes
• Minnesota: 30% via the Working Family Credit (slightly different structure)

For a single parent with two qualifying children earning $25,000 in wages in 2026, the federal EITC is approximately $6,604. A state EITC at 25% would add approximately $1,651 in state refundable credit (DC at 50% would add approximately $3,302). The state EITC is in addition to any state personal exemption or dependent credit, not in lieu.

Worked Example: New Jersey Family of Four at $80,000

New Jersey couple, MFJ, two qualifying children, $80,000 of wage income. NJ has no general standard deduction.

NJ taxable income calculation: $80,000 gross. Subtract personal exemptions ($1,000 + $1,000 for the two filers + $1,500 + $1,500 for the two dependents = $5,000). Plus the $1,500 NJ Child Tax Credit threshold for children under 6 (if applicable, this is a credit not a deduction; here we assume both children are over 6, so it does not apply). Taxable income = $75,000.

NJ tax on $75,000 MFJ: roughly $2,100 at NJ's graduated brackets (1.4% to 5.525% in this band). NJ refundable Earned Income Credit at $80,000 is zero (income too high; NJ EITC phases out around $63,000 MFJ for two children). Net NJ state tax owed: approximately $2,100. The personal exemption mechanic saves the family approximately $250 in state tax versus a no-exemption alternative.

For a comparable family in Pennsylvania, the no-exemption state with a 3.07% flat rate, state tax on $80,000 of gross income is approximately $2,456 (3.07% of essentially gross). Pennsylvania's simpler structure produces a slightly higher dollar tax than New Jersey's exemption-based structure for this family, despite Pennsylvania's lower marginal rate. The exemption mechanism matters at the dollar level even when the mechanics look opaque.