In the middle of filing your taxes? Keep these changes in mind.
This tax season is the first year where all of the changes and provisions passed under the Tax Cuts & Jobs Act are affecting both individual taxpayers and companies with broad changes for deductions and tax rates. The changes, effective January 1, 2019, affect most every tax payer filing as an employee or self-employed business owner.
Some of the tax provisions enacted by the new tax act will be temporary, while others permanent. Affecting essentially every taxpayer is the increase in the standard deduction, which is meant to simplify the tax preparation process by replacing itemized deductions with a larger standard deduction.
A provision in the tax code known as indexing will affect 2019 Tax Brackets & Rates, which is essentially an inflation adjusted modification to account for rising inflation trends. For 2019, income brackets increased by roughly 2% across all income levels. Income brackets for capital gains have also increased slightly for 2019.
With personal exemptions eliminated under the new tax law, a larger single standard deduction was devised in order to streamline returns for taxpayers. Standard deduction amounts increased slightly for 2019.
For both employees and self-employed individuals, IRA and Qualified Plan contributions have increased as well for 2019.
Other significant changes occurring for 2019 include:
- Estate Tax Exemption increases from $11.18 million to $11.40 million in 2019
- Elimination of the ACA penalty for not having health insurance becomes effective
- Unreimbursed medical expenses must exceed 10% of AGI in order to deduct
- Alimony is no longer deductible for the payor and no longer taxable for the recipient for divorce decrees issued after December 31, 2018
Kent G. Forsey, CFP®
Sources: https://taxfoundation.org, IRS.gov, © OneBlueWindow, LLC