In 2018, the Tax Cuts & Jobs Act went into place. This law included some major changes to tax brackets, deductions, exemptions, credits and the like. Thankfully, in 2019 these changes are basically the same; however, as with years past, the thresholds have been updated to reflect inflation for 2019. I will walk you through the updates for what to know before filing your 2019 tax return.
Tax Bracket Changes
As noted above, the tax brackets themselves remain the same from 2018 to 2019, but the income thresholds for these brackets have been updated. I have included both 2019 and 2018 amounts for comparison in the charts below.
Personal Exemption
Consistent with 2018, the personal exemption remains completely eliminated due to higher standard deductions amounts (see below).
Standard Deduction
The chart below reflects the updated amounts for the standard deduction for 2019. You will notice that the updates to the standard deduction amounts from 2018 to 2019 are nominal.
Alternative Minimum Tax
The Alternative Minimum Tax (AMT) exemption amounts have been permanently adjusted for inflation. The new exemption amounts are as follows:
No Alimony Deduction
A new change for 2019 is that for divorces and separation agreements finalized in 2019 or after, alimony payments are not deductible for the payer or counted as taxable income to the payee.
No More Individual Mandate
As of 2019, the individual mandate penalty for not having health insurance has been eliminated. Taxpayers will no longer be charged a fee (a.k.a. the shared responsibility payment per the Affordable Care Act) for not having individual health insurance for all or part of 2019.
Earned Income Tax Credit
For 2019, the Earned Income Tax Credit (EITC) is maxed out at $6,557 (compared to $6,431 previously) for taxpayers filing jointly who have three or more qualifying children; the maximum credit for families with two qualifying children is $5,828 (compared to $5,716 previously); those with one qualifying child face have a maximum of $3,526 (compared to $3,461 previously); and the maximum credit for no qualifying children is $529 (compared to $519 previously).
Adoption Credit
The previous maximum adoption credit was $13,810 and has increased slightly in 2019 to $14,080 per child for adoptions finalized in 2019. This credit is not refundable.
Foreign Earned Income Exclusion
The foreign earned income exclusion has increased to $105,900 for 2019, up from $103,900 in the 2018 tax year.
When do you plan on filing your tax return? Are you an early or late filer? Don’t forget to file by April 15th the latest or file for an extension!
