2019 Tax Updates for Individuals

2019 Tax Updates for Individuals

 Tax Reform Impact: What You Should Know For 2019

 Lower Tax Rates and Changed Income Ranges:

The bill retains the seven tax brackets found in current law, but lowers a number of the tax rates. It also changes the income thresholds at which the rates apply.

The brackets before tax reform were: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.

The 2019 brackets are: 10%, 12%, 22%, 24%, 32%, 35% and 37%

The income thresholds at which these brackets kick in have changed, as well.

Tax Relief for Individuals and Families:

 Single taxpayers will see their standard deductions jump from $6,350 for 2017 taxes to $12,200 for 2019 taxes (the ones you file in 2020). Married couples filing jointly see an increase from $12,700 to $24,400 for 2019. These increases mean that fewer people will have to itemize.

Increased Child Tax Credit:

For, families with children the Child Tax Credit is doubled from $1,000 per child to $2,000. In addition, the amount that is refundable grows from $1,100 to $1,400. The bill also adds a new, non-refundable credit of $500 for dependents other than children. Finally, it raises the income threshold at which these benefits phase out from $110,000 for a married couple to $400,000.

Personal and  Dependent Exemption:

The bill eliminates the personal and dependent exemptions for 2019, which was $4,050 for 2017.

State and local taxes/Home mortgages:

 The bill limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes have generally been fully tax deductible. The bill also caps the amount of mortgage indebtedness on new home purchases on which interest can be deducted at $750,000 down from $1,000,000 in current law.

Health care:

 The bill eliminates the tax penalty for not having health insurance after December 31, 2018. It also temporarily lowers the floor above which out-of-pocket medical expenses can be deducted from the current law floor of 10% to 7.5% for 2017 and 2018. In 2019, a separate tax extender bill kept the 7.5% of AGI rate for 2019. In 2020, the percentage is set to increase to 10% of AGI.

So for 2019, you can deduct medical expenses that are more than 7.5% of your adjusted gross income.

Alternative Minimum Tax Exemptions Increased:

The bill also eases the burden of the individual alternative minimum tax (AMT) by raising the income exempted from $84,500 (adjusted for inflation) to $111,700 married filing jointly and from $54,300 (adjusted for inflation) to $71,700 for single taxpayers, so fewer taxpayers will pay it in 2019.

Self-employed (contractors, freelancers, sole proprietors) and small businesses:

 The bill has a myriad of changes for business. The biggest includes a reduction in the top corporate rate to 21%, a new 20% deduction for incomes from certain type of “pass-through” entities (partnerships, S Corps, sole proprietorships), limits on expensing of interest from borrowing, almost doubling of the amount small businesses can expense from the 2017 Section 179 amount of $510,000 to $1,000,000, and eliminates the corporate alternative minimum tax (AMT).

Pursuant to US Treasury Department Regulations, you are advised that any information and advice, including any attachments and enclosures, may not be used for the purpose of (i) avoiding any tax liabilities and or penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to any other person(s) any tax-related matters addressed herein.
The above article is intended only to provide tax information on the changes to tax affecting the specific tax year as provided by the Internal Revenue Service and not to provide any legal, tax, investment, or any other bisiness advice to the taxpayer. Before taking any action, seek the assistance of a professional who is familiar with your specific situation for advice on any tax, legal, investment, or any other professional issues that may affect you or your business.