While this checklist outlines important tax changes for 2019, additional changes in tax law are more than likely to come up during the year ahead.
► Tax Brackets and Tax Rates
The big news is, of course, the tax brackets and tax rates for 2019. There are still seven (7) tax rates. They are: 10%, 12%, 22%, 24%, 32%, 35% and 37% (there is also a zero rate). Here's how those break out by filing status:
Tax rates for trusts and estates have changed, too:
You can compare all of these numbers to the 2018 tax tables here.
- Remember to pay attention to the progressive nature of the rates when you're making comparisons - don't simply multiply your income by the top rate. For more on taxable income and marginal rates, check out this quick primer.
Standard Deduction Amounts. The standard deduction amounts will increase to $12,200 for individuals, $18,350 for heads of household, and $24,400 for married couples filing jointly and surviving spouses.
- For 2019, the additional standard deduction amount for the aged or the blind is $1,300. The additional standard deduction amount increases to $1,650 for unmarried taxpayers.
- For 2019, the standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,100 or the sum of $350 and the individual’s earned income.
There will be no personal exemption amount for 2019. The personal exemption amount was set to zero (0) under the Tax Cuts and Jobs Act.
The alternative minimum tax (AMT) exemption amounts are adjusted for inflation. Here’s what those numbers look like for 2019:
The kiddie tax applies to unearned income for children under the age of 19 and college students under the age of 24. Unearned income is income from sources other than wages and salary, like dividends and interest. Taxable income attributable to net unearned income will be taxed according to the brackets applicable to trusts and estates (see above). For earned income, the rules are the same as before.
There are changes to itemized deductions found on Schedule A, including:
- Medical and Dental Expenses. The "floor" for medical and dental expenses rises to 10% (it was 7.5% in 2018), which means you can only deduct those expenses which exceed 10% of your AGI.
- State and Local Taxes. Deductions for state and local sales, income, and property taxes remain in place but are limited to a combined total of $10,000 ($5,000 for married taxpayers filing separately).
- Home Mortgage Interest. You may only deduct interest on acquisition indebtedness - your mortgage used to buy, build or improve your home - up to $750,000 ($375,000 for married taxpayers filing separately). For more on mortgage interest under the new law, click here.
- Charitable donations. As a result of tax reform, the percentage limit for charitable cash donations to public charities increased from 50% to 60% in 2018 and will remain at 60% for 2o19.
- Casualty and Theft Losses. The deduction for personal casualty and theft losses is repealed except for losses attributable to a federal disaster area. For more on casualty losses after a disaster, click here.
- Job Expenses and Miscellaneous Deductions subject to 2% floor. Miscellaneous deductions, including unreimbursed employee expenses and tax preparation expenses, which exceed 2% of your AGI have been eliminated. For more info, click here.
For high-income taxpayers who itemize their deductions, the Pease limitations, named after former Rep. Don Pease (D-OH) used to cap or phase out certain deductions. There are no Pease limitations in 2019.
(For more on changes to Schedule A, click here.)
Some additional tax credits and deductions were adjusted for 2019 or changed under the tax reform law. Here's a look at a few of the most popular:
- Child Tax Credit. The child tax credit has been expanded to $2,000 per qualifying child and is refundable up to $1,400, subject to phaseouts. The bill also includes a temporary $500 nonrefundable credit for other qualifying dependents. Phaseouts, which are not indexed for inflation, will begin with adjusted gross income (AGI) of more than $400,000 for married taxpayers filing jointly and more than $200,000 for all other taxpayers. For more about the expanded CTC, click here.
- Earned Income Tax Credit (EITC). For 2019, the maximum EITC amount available is $6,557 for married taxpayers filing jointly who have three or more qualifying children. Phaseouts apply. You can check out Revenue Procedure 2018-57 (downloads as a pdf) for a table providing maximum credit amounts for other categories, income thresholds, and phaseouts.
- Adoption Credit. Despite rumors of the death of the adoption credit, it’s still in place. For 2019, the credit allowed for an adoption of a child with special needs is $14,080, and the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,810. Phaseouts apply.
- Student Loan Interest Deduction. Like the adoption credit, there were rumors that the student loan interest deduction had been shuttered: it was not. For 2019, the maximum amount that you can deduct for interest paid on student loans remains $2,500. Phaseouts apply for taxpayers with MAGI more than $70,000 ($140,000 for joint returns) and the deduction is completely phased out for taxpayers with MAGI of $85,000 or more ($170,000 or more for joint returns).
- Lifetime Learning Credit. For the 2019 tax year, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $116,000, up from $114,000 for tax year 2018.
- Medical Savings Accounts (MSA). For 2019, a high-deductible health plan (HDHP) is one that, for participants who have self-only coverage in an MSA, has an annual deductible that is not less than $2,350 but not more than $3,500; for self-only coverage, the maximum out-of-pocket expense amount is $4,650. For 2019, HDHP means, for participants with family coverage, an annual deductible that is not less than $4,650 but not more than $7,000; for family coverage, the maximum out-of-pocket expense limit is $8,550.
- Foreign Earned Income Exclusion. For tax year 2019, the foreign earned income exclusion is $105,900, up from $103,900 for tax year 2018.
The unpopular shared individual responsibility payment has been eliminated for the tax year 2019 (remember that it remains in place for 2018).
Don't forget about those changes affecting pass-throughs and business owners who file a Schedule C, including the new Section 199A deduction. You'll find more on that here.
For federal gift and estate tax rates, check out this post from Forbes' Ashlea Ebeling.
More cost-of-living and other adjustments are available through Revenue Procedure 2018-57 (downloads as a pdf).