The New Year brought many changes that will affect every taxpayer in the United States. Be sure to discuss these changes with your tax adviser at Jackson Hewitt with the aim of minimizing your tax liability or maximizing your tax refunds. Here are a few of the tax changes that may have an effect on your taxes for 2019.
By 2019, the base retirement contributions will increase by $500 while the catch-up contributions for taxpayers 50 years old and above will remain as is from the previous year.
The most important things to know about retirement contributions:
- For IRAs, it will be $6,000 plus the $1,000 catch-up contribution for taxpayers 50 years old and up
- For employer-sponsored plans, such as 401(k), 403(b), 457, and TSP, it’s $19,000 plus the $6,000 catch-up contribution for taxpayers 50 years and older
In 2018, these were $5,500 for IRAs and $18,500 for employer-sponsored plans.
Until the end of 2018, the payor can consider alimony payments as tax deductible while the recipient has to declare it as income and, thus, taxable. But if your divorce decree was issued after December 31, 2018 – or in other words, divorce decrees issued starting in January 1, 2019 – will neither be tax deductible for the payor and nor taxable on the part of the recipient.
Alternative Minimum Tax (AMT)
Created in the 1960s, the AMT imposes levies on taxpayers who claim unwarranted amounts of tax breaks. It’s effectively a second set of tax rates designed to prevent abuse of tax breaks for any reason.
There’s an income exemption, however, to the AMT wherein certain income amounts will be exempted from it. There’s also an income phase-out period beyond which said exemption will not apply. Both the income exemption and income phase-out period are indexed for inflation, as is the case for the tax brackets and rates.
For 2019, the exemption amount is $71,700 and the exemption phase-out is $510,300 for singles. For married couples filing jointly, these are $111,700 and $1,010,600 respectively.
There are also other major tax changes in 2019 including:
- The lifetime gift and estate tax exemption will increase to $11. 4 million; in 2018, it was $11.8 million. The annual gift exclusion, however, remains at $15,000 from 2018.
- The removal of the Affordable Care Act penalty, which is good news for people who have no health insurance coverage.
Many, if not most, of these changes can be confusing for the average taxpayer. Fortunately, it doesn’t have to be since you have a year to learn these changes and you have the assistance of a tax advisor.