The new income tax season, and in particular all the new laws, is making this filing period more complicated than usual. Small business deductions, personal credits, government shutdowns, and other complications foreshadow a confusing period coming ahead. We’ll show you how to navigate it all below.
1. Standard Deductions Are Up
The standard deduction for single filers has increased by $200 for 2019. It has increased by $400 for married couples who file jointly. Unfortunately, there is no personal exemption for 2019. Standards deductions are now $12,200 for single filing tax payers, $24,400 for married couples filing jointly, and $18,350 for those filing as the head of household.
2. New Small Business Tax Bonus
New deductions are aimed at giving tax breaks to sole proprietors, partners, and owners of S corps which allow many of them to deduct 20% of qualified business income. There is confusion as to which business owners can claim this deduction, along with how much they can claim. This is sure to require expert interpretation and complex calculations.
3. No More Health Insurance Mandate
Ever since Obamacare, aka the Affordable Healthcare Act, was passed in 2010 through 2018, those who didn’t have health insurance were charged a fee called the Shared Responsibility Payment. It was also referred to as the Obama penalty, no insurance fine, and individual mandate. In 2017 (and possibly 2018), it was $695 per adult and $347.50 for every child under the age of 18. If you were one of the approximately 6.5 million who had to pay the penalty in years past, rejoice. The fee no longer applies to anyone regardless of their health insurance or lack thereof.
4. Higher 2019 Estate And Gift Tax Limits
Opponents call this the “death tax” given that taxes have already been paid on these earnings. It is taxed again when the tax payer dies and passes their wealth on to family. Given the tax is currently 40%, it makes sense to do as much planning while you can.
- The estate and gift tax exemption rose $11.4 million per individual, which is up from $5.49 million in previous years.
- It means you can leave up to $11.4 million in total assets without paying the tax.
- The estate and gift tax exemption rose to $22.8 million per married couple.
- The gift exclusion per year remains at $15,000.
- These particular income tax cuts are set to expire in 2025.
5. Income Tax Brackets 2019
The government has adjusted tax brackets for inflation in the coming year.
- Individuals start at 10% for $0 to $9,700 in yearly income. They pay 24% for $78,951 to $168,400 in yearly income. A rate of 37% is applied for income of $612,350 or higher.
- Head of households start at 10% for $0 to $13,850 in yearly income. They pay 24% for $52,851 to $84,200 in yearly income. A rate of 37% is applied for income of $510,300 or higher.
- Married couples filing joint returns start at 10% for $0 to $19,400 in yearly income. They pay 24% for $39,475 to $84,199 in yearly income. A rate of 37% is applied for income of $510,300 or higher.
Read the entirety of the tax bracket in IRS Publication 15.
Income Taxes in Houston
If your Houston-based family or business needs help preparing your 2019 income tax return, contact us.