With the new year many tax changes go into effect. Your 2018 taxes are not completed yet our attention must be drawn to 2019 changes. Some of these changes are due to inflation and others are simply part of the Tax Cuts and Jobs Act of 2018.
First, changes to the Affordable Care Act for 2019. People who forgot health insurance in 2019 will not have to pay a penalty. The new tax law repealed the fines under Obamacare’s individual mandate for post-2018 years. This relief does not apply for 2018 returns filed in 2019. The income levels to qualify for the health premium credit in 2019 go up. The credit is available for people with household incomes ranging from 100% to 400% of the federal poverty level $12,140 to $48,560 for singles and $25,100 to $100,400 for a family of four who buy health insurance through one of the exchanges. These threshold amounts are even higher for people living in Alaska or Hawaii. Individuals eligible for Medicare or other federal insurance do not qualify for a credit. Nor do people who can get affordable health coverage through their employer.
The annual cap on deductible contributions to HSAs rises in 2019 to $3,500 for self-only coverage and $7,000 for account owners with family coverage. Qualifying policies must limit out-of-pocket costs for deductibles and copayments to $13,500 for family health plans and $6,750 for people with individual coverage. Minimum policy deductibles stay at $2,700 for families and $1,350 for individuals.
The threshold for deducting medical expenses on Schedule A jumps from 7.5% of adjusted gross income to 10%, starting with 2019 returns filed in 2020. The new tax law revived the 7.5%-of-AGI threshold, but only for 2017 and 2018.
Limits on deducting long-term-care premiums are generally higher in 2019. Taxpayers who are age 71 or older can expense as much as $5,270 per person. Filers age 61 to 70 $4,220. Those who are 51 to 60 can deduct up to $1,580. Individuals who are 41 to 50 can take $790. And people age 40 and younger $420. For most, long-term-care premiums are medical expenses deductible only by itemizers and only to the extent that total medical expenses exceed 10% of adjusted gross income.
Self-employed individuals can deduct long-term-care premiums, subject to the dollar limits, on Schedule 1 of the new 1040 form without regard to the 10%-of-AGI threshold.
The 2019 standard deductions go up a bit. Married couples get $24,400 plus $1,300 for each spouse age 65 or older. Singles claim $12,200…$13,850 if 65 or up. Household heads get $18,350 plus $1,650 once they reach age 65. Blind people receive $1,300 more ($1,650 if unmarried and not a surviving spouse).
Tax rates on long-term capital gains and qualified dividends do not change. But the income thresholds to qualify for the various rates go up for 2019. The 0% rate applies for individual taxpayers with taxable incomes up to $39,375 on single returns, $78,750 for joint returns and $52,750 for head-of-household filers. The 20% rate starts at $434,550 for singles, $461,700 for heads of household and $488,850 for couples filing jointly. The 15% rate is for filers with taxable incomes between the 0% and 20% break points. The 3.8% surtax on net investment income kicks in for single people with modified AGI over $200,000…$250,000 for marrieds.
AMT exemptions climb for 2019. They increase to $111,700 for couples and $71,700 for both singles and heads of household. The phaseout zones for the exemptions start at higher income levels as well, above $1,020,600 for couples and $510,300 for single filers and household heads. Also, the 28% AMT tax rate kicks in a bit later in 2019, above $194,800 of alternative minimum taxable income.
The adoption credit can be taken on up to $14,080 of qualified expenses. The full credit is available for a special-needs adoption, even if it costs less. The credit phases out with modified AGIs over $211,160 and ends at $251,160. The exclusion for company-paid adoption aid also increases to $14,080.
2019 TAX BRACKETS
2018 tax return preparation will require substantial consideration regarding the numerous tax law changes in order to accomplish the best result for you. Additionally, changes continue to impact your 2019 current year taxes.
Call our office today and book an appointment to prepare your 2018 taxes and review any changes needed for 2019. Failing to plan is planning to fail!!