Tax Reference: Changes in Effect in 2019

Tax Reference: Changes in Effect in 2019

The Tax Cuts and Jobs Act (TCJA) of 2017 created some significant changes in the tax law. Many of the tax brackets and limits are being adjusted annually for inflation. While the major changes in the tax law happened between 2017 and 2018, there are still some adjustments that did not take effect until 2019. Below are a few important changes to be aware of.

Income Tax Brackets and Rates

In 2019, the individual and trust tax brackets were increased for inflation. The top bracket remains a 37% rate, but, now single filers with $510,300 of taxable income and those that are married and filing jointly with $612,350 of taxable income, will reach the highest tax bracket.

Individual Tax Brackets and Rates, 2019

Federal Taxable Income
Rate Single Married Filing Jointly Heads of Households Married Filing Separately

 

10% $0-$9,700 $0-$19,400 $0-$13,850 $0-$9,700
12% $9,700-$39,475 $19,400-$78,950 $13,850-$52,850 $9,700-$39,475
22% $39,475-$84,200 $78,950-$168,400 $52,850-$84,200 $39,475-$84,200
24% $84,200-$160,725 $168,400-$321,450 $84,200-$160,700 $84,200-$160,725
32% $160,725-$204,100 $321,450-$408,200 $160,700-$204,100 $160,725-$204,100
35% $204,100-$510,300 $408,200-$612,350 $204,100-$510,300 $204,100-$306,175
37% $510,300+ $612,350+ $510,300+ $306,175+

Standard Deduction and Personal Exemption

Standard Deduction doubled for single and jointly filers. The standard deduction for single individuals is now $12,200 and $24,200 for those filing jointly. The personal exemption was eliminated.

Standard Deductions
Single $12,200
Married filing jointly $24,400
Married filing separately $12,200
Head of household $18,350
Unmarried Individuals Age 65+ or Blind (extra) $1,650
Married Individuals Age 65+ or Blind (extra) $1,300
Personal exemption $0

Gifts, Trust and Estates Tax and Exemptions

The trust and estate tax brackets were also increased for inflation. The highest bracket of 37% now starts with $12,750 of income. The lifetime gift and estate tax exemption has increased to $11.4 million per person. And, the annual gift exemption remains the same at $15,000.

Retirement Contributions

The contribution limit for Traditional and Roth IRA’s has increased to $6,000. The age 50+ catch-up contribution limit remains $1,000. Deduction limits for Traditional IRAs and contribution eligibility for Roth IRAs have increased for inflation.

The Simplified Employee Pension Individual Retirement Arrangement (SEP IRA) Limit has increased to $56,000. The SIMPLE IRA contribution limit has increased to $13,000 with the 50+ Catch-up contribution remaining at $3,000.

The Employer-sponsored plan (401(k), 403(b), 457) contribution limit has increased to $19,000. The age 50+ catch-up contribution limit remains at $6,000.

Alimony and Medical Deductions

A major change in alimony will take place for 2019. For divorces that were finalized after December 31, 2018, alimony payments are no longer deductible by the paying individual. Additionally, they are no longer considered taxable to the recipient as they were in the past.

The amount of medical expenses that are deductible has decreased. Medical expenses are only deductible in excess of 10% of your adjusted gross income. This is an increase of 7.5% in previous years.

We hope that this allows you to better set your tax withholding and estimates for 2019. Please consult your advisor and CPA with any questions on additional changes that have taken place and how those changes may affect you.

* Charts pulled from www.irs.gov

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