In 2017, Congress passed The Tax Cuts and Jobs Act (TCJA), which was the largest piece of tax legislation that we’ve seen in three decades. The new law had an impact on almost all taxpayers who came to our Richardson, TX tax office, as well as taxpayers throughout the country. Most of the changes went into effect on January 1st, 2018. While changes in 2019 won’t have the same dramatic impact as last year’s changes, they will impact many taxpayers.
Increased Standard Deductions
- Single and Married Filing Separately – Increased from $12,000 to $12,200
- Head of Household – Increased from $18,000 to $18,350
- Married Filing Jointly – Increased from $24,000 to $24,400
Redesign of Supplemental Schedules
In 2018 under the TCJA, while the IRS decreased the size of the Form 1040 and eliminated the 1040-EZ and 1040-A forms, they added six supplemental schedules that rolled into the 1040. In 2019, this has been decreased to three schedules.
Individual Health Insurance Mandate Penalty
The penalty for not having Health Insurance passed under the Affordable Care Act (also known as Obamacare) was eliminated in 2019.
The Qualified Business Income Deduction (QBID) Forms
Form 8995 will be used for most QBID simplified computations while Form 8995-A will be used for more complex calculations.
Alimony Deduction Eliminated
For divorce decrees signed after 12/31/2018 that require alimony payments, the payer will no longer be able to deduct payments made from AGI and the payee will no longer need to report the payments as income.
Retirement Account Contribution Limits
401k contribution limits increased to $19,000 in 2019 with a $6,000 catch-up provision for those over age 50. IRA Contribution limits increased to $6,000 with a $1,000 over age 50 catch-up provision.
HSA Contribution Limits
In 2019, HSA contribution limits increased to $3,500 for self-coverage and $7,000 for family coverage.
AMT Exemptions Increased
The exemption for amounts for the Alternative Minimum tax increased which continues the trend of making fewer taxpayers subject to the AMT.
In addition, In January, the President signed into law the Further Consolidated Appropriations Act, 2020. I covered this in an earlier blog post but some of the major items that were part of the law included:
- Retroactive reinstatement for the Mortgage Insurance Premium (PMI) deduction through 2020.
- Retroactive reinstatement for above the line qualified tuition and related expenses deduction through 2020.
- Retroactive reinstatement for the construction of energy efficient homes through 2020.
- The medical expenses deduction returns to 7.5% for 2019 and 2020 (it had moved up to 10% for 2019).
- For individuals that suffer losses in qualified disaster areas, starting in January 1, 2018 through February 20, 2020, they will be able to take up to $100,000 from retirement plans to help pay for recovery costs without incurring the 10% penalty for early withdrawal.
For Retirement Plans, starting in 2020:
- The age for required minimum distributions increases to 72.
- The Act removes the age limit for contributions to traditional IRAs.
- New parents can take penalty free distributions from a 401(k), IRS or other qualified retirement plans within a year after a birth or adoption.
Do You Need Help With Your Taxes?
If you need help in getting your taxes prepared accurately and professionally or have an IRS problem you would like to resolve, we’d like to help. Please give me a call at (972) 821-1991 or email me at firstname.lastname@example.org.