There have been a few changes/updates to the tax laws in the United States for 2019, but none as significant as those put into law in 2018. Below are the updated 2019 tax bracket ranges and changes to federal tax rules for 2019.
New 2019 Tax Brackets (dollars are Taxable Income)
Standard Deduction and Personal Exemption
Standard deductions increase slightly from 2018 as follows:
Single = $12,200
Married Filing Joint = $24,400
Head of Household = $18,350
Medical Expense Deduction
The AGI threshold for 2019 has increased from 7.5% to 10%. Therefore, any out of pocket medical expenses you incur above 10% of your AGI (and you exceed the standard deduction amount) can be deducted.
Affordable Care Act (Obamacare) Healthcare Mandate
The rule has been eliminated for 2019. You will no longer be penalized for not having a minimum amount of healthcare coverage.
Child Tax Credit
This tax credit remains the same at $2,000 for each dependent under age 17, with up to $1,400 refundable to lower-income taxpayers. The credit phaseout thresholds are much higher, so more higher-income taxpayers will now qualify to take this credit.
A credit of $500 is still available for each dependent who is not a qualifying child (ex., disabled parents, grandparents and adult children)
Capital Gains and Investment Income Taxes
1. Short-term capital gains are still taxed as ordinary income. Since the tax brackets applied to ordinary income have changed significantly, your short-term gains are likely taxed at a different rate than they formerly were.
2. Long-term capital gains tax rate income thresholds are similar to where they would have been under the old tax law. For 2018, they are applied to maximum taxable income levels as follows:
3. The 3.8% net investment income tax that applied to high earners remains the same and with the exact same income thresholds. If Congress is successful in repealing the Affordable Care Act, this could potentially go away, but it remains for the time being.
Businesses
1. The C-Corporation tax rate remains at a flat 21%.
2. Pass through companies (S-Corporations, Partnerships, LLCs and sole proprietors) still receive a 20% deduction of qualified business income. This change is complex and does have certain restrictions for service-type companies (law, accounting, health and financial services), so please contact me if you have specific questions.
3. 100% Bonus Depreciation for the purchase of certain assets that are put into use during the tax year begins on Sept. 27, 2017 (to apply toward the 2018 tax year). This deduction is temporary and will last until 2022.
There are many more small changes to both business and individual taxes, but this blog was intended to educate you on the major changes that effect the majority of taxpayers. If you have any specific examples or items you would like to discuss, please contact me!