2019 Individual Tax Change Highlights

2019 Individual Tax Change Highlights

Below are some of the highlights of individual tax changes for the 2019 tax year beginning January 1, 2019. They are not the numbers and tables that will be used to prepare your 2018 tax returns in 2019. These are the numbers that will be used to prepare your 2019 tax returns in 2020.

If you plan to make more money or change your circumstances (i.e., get married, start another business, have a baby), consider adjusting your withholding or tweaking your estimated tax payments. Be sure to let your PPG Partners CPA or professional know of any expected changes. To check out the updated IRS withholding calculator or for a new Form
W-4, go to ppgpartners.net/forms.

Tax Brackets and Tax Rates. For 2019, seven tax rates will apply for individuals: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Four tax rates will apply for estates and trusts: 10%, 24%, 35%, and 37%. You can find the 2019 tax bracket breakouts for each filing status at ppgpartners.net/2019-tax-brackets.

Standard Deduction Amounts. For 2019, 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.

  • The additional standard deduction amount for seniors (age 65 or older) or the blind is $1,300. The additional standard deduction amount increases to $1,650 for unmarried taxpayers.
  • 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.

Kiddie Tax. 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 (found at ppgpartners.net/2019-tax-brackets). 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 Adjusted Gross Income (AGI).  (Your AGI is your total gross income minus specific deductions, before your credits and itemized deductions.)
  • 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).
  • 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 2019.
  • Casualty and Theft Losses. The deduction for personal casualty and theft losses is repealed except for losses attributable to a federal disaster area.
  • 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 high-income taxpayers who itemize their deductions, the Pease limitations, named after former Rep. Don Pease, used to cap or phase out certain deductions. There are no Pease limitations in 2019.

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 AGI of more than $400,000 for married taxpayers filing jointly and more than $200,000 for all other taxpayers.
  • 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.
  • Adoption Credit. 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. For 2019, the maximum amount that you can deduct for interest paid on student loans remains $2,500. Phaseouts apply for taxpayers with Modified Adjusted Gross Income (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 2019, the AGI 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.
  • 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 shared individual responsibility payment has been eliminated for the 2019 tax year (remember that it remains in place for 2018).