2019 Year-End Preparations Before Another Tax Season
As 2019 is coming to an end, and we’re preparing for another tax season, here’s a few 2020 filing season changes for 2019 tax returns:
Increased Standard Deduction
The standard deduction amounts will be slightly increased to continue to allow more individuals to file without itemizing deductions on Schedule A.
- Single & Married Filing Separate – $12,200 vs $12,000 for 2018 tax returns
- Head of Household – $18,350 vs $18,000 for 2018 tax returns
- Married Filing Jointly – $24,400 vs $24,000 for 2018 tax returns
Redesigned New Supplemental Schedules
For 2018 tax returns, taxpayers had six new supplemental schedules that would build on the Form 1040.
For 2019 tax returns, those schedules have been redesigned and merged into three schedules.
- Schedule 1 – This schedule will include additional income and adjustments to income
- Schedule 2 – This schedule will include additional taxes
- Schedule 3 – This schedule will include additional credits and payments
Form 1040 – SR
New for 2019, seniors (aged 65 and older) will have their own tax return option thanks to the Bipartisan Budget Act of 2018.
- This form will have a larger font size and better color contrast making it easier to read
- Requires that you claim the standard deduction instead of itemizing on Schedule A
- There are NO income limits or restrictions on types of income as opposed to the prior Form 1040EZ
The penalty (individual mandate) for not having health insurance no longer applies for 2019 federal tax returns. However, some states have their own individual health insurance mandate, requiring you to have qualifying health coverage or pay a fee with your state taxes for the 2019 tax year.
As of now, Massachusetts, New Jersey, and the District of Columbia are the only states with health insurance mandates and penalties for 2019. Vermont goes into effect in 2020.
Schedule A Medical Expense Threshold Increased to 10% vs the 7.5%
For 2019 tax returns, the threshold for medical expenses for Schedule A will revert back to 10% of AGI in place of the 7.5% it’s been for the last two years.
Qualified Business Income Deduction (QBID) Form(s)
- Taxpayers who have Qualified Business Income (QBI), qualified real estate investment trust (REIT) dividends, or qualified income from a publicly traded partnership (PTP) will use Form 8995 Qualified Business Income Deduction Simplified Computation to report the computation for 2019.
- Form 8995-A will be for more complex QBI computations.
Income Tax Brackets & Tax Rates
For 2019 tax returns, there are still seven tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. However, the salary threshold that brings you to a higher tax rate has increased a little.
Alimony Deduction Eliminated
- For divorce decrees signed after 12/31/2018 that require alimony payments, the payer will not be allowed a deduction for payments made.
- The payee will NOT be required to claim the alimony as income on their respective tax returns.
401k Contributions Limits
- Increased to $19,000 (compared to $18,500 for 2018) and $6,000 for taxpayers over age 50 making catch-up contributions.
IRA Contribution Limits
- Increased to $6,000 (compared to $5,500 for 2018) with a $1,000 catch-up amount for taxpayers over age 50.
AMT Exemption Increased
The Alternative Minimum Tax (AMT) exemption amounts have been increased for inflation for 2019, making fewer taxpayers subject to AMT.
- Single – $71,700 vs $70,300 for 2018 tax returns
- Married Filing Joint – $111,700 vs $109,400 for 2018 tax returns
- Married Filing Separate – $55,850 vs $54,700
- Trust and Estates – $25,000 vs $24,600
HSA Contribution Limits
- Increased to $3,500 (compared to $3,450 for 2018) self-coverage only and $7,000 (compared to $6,900 for 2018) for family coverage
Whether you’re already a client or you want to hire an accounting firm, it’s always a good idea to talk tax planning with your accountant. Reach out with questions before the year ends!
For full source information: https://www.olt.com/main/home/whatsnew2019ty.asp