The standard deduction has increased for everyone.Whether married, single, married but filing individually or head of household, the standard deduction has effectively doubled in an effort to cut down on itemized filings.
Medical deductions are more beneficial.
2019 is a good year to finally get an expensive medical procedure done, if you’ve been putting it off. Taxpayers used to have to spend 10 percent of their adjusted gross income on qualifying medical expenses to take a deduction, but now this has been lowered to 7.5 percent. That means your medical bills will be far less burdensome since you can deduct more of the costs when it comes time to file your taxes.
Your tax bracket may have changed.
Under the new tax bill, most income tax brackets have changed. Check them out to learn if your income bracket has been affected. If so, you may have to update your withholdings.
The marriage penalty has changed.
Couples who file jointly may now be able to file under their combined total income, pushing them into a higher tax bracket and lowering their total taxes owed.
If you’re wealthy, taxes won’t be as much of a burden.
For those in the top tax brackets, taxes have been lowered drastically, a holdover from the Reagan administration, the belief here is that top earners are also job creators, and when these folks pay fewer taxes, they’ll hopefully create more jobs.
If you’re poor, none of this will really affect you.
While most everyone’s tax bracket has changed, those in the lowest income bracket haven’t really been affected at all, though they may see cuts to any government programs they currently utilize.
Alimony has changed.
Before this tax bill, alimony payments were tax deductible, and alimony received had to be treated as income. Both of these provisions have been eliminated. This essentially shifts the alimony tax burden from the payee to the payor.
No one will be penalized for not having insurance.
Under the Affordable Care Act, any individual who was not consistently medically-insured throughout the tax year was penalized. This penalty has been eliminated for 2019. It is too early to tell how many people will choose to take advantage of this.
Mortgage interest is still deductible.
Before the tax bill was passed, many experts were speculating what might be in it. Because of many circulating and changing tidbits of information, many people were unclear about the changes; a large concern for homeowners was the ability to continue to deduct mortgage interest payments. This is still possible, though there is a new cap on the amount: $750,000. (Any mortgage taken out prior to Dec. 31, 2017 was capped at $1 million.)
Investors will keep more capital gains.
One of the most hotly-contested and divisive pieces of the new tax bill was the decrease in capital gains taxes. However, if you’re someone who benefits from capital gains (and many Americans do), then you’ll get to keep more of your ROI.
Moving expenses are no longer deductible.
Under previous tax law, an individual who relocated for their job could deduct any related expenses, including movers, gas and more. This deduction will no longer be available. The idea behind this: since corporations have just received a large tax cut (some are saving billions of dollars in taxes), they can afford to provide incentives for employees to move using their own finances.
529 accounts don’t have to wait for college.
Originally intended to help parents save for their child’s future college tuition, a 529 can now be used to pay for up to $10,000 of primary and secondary education per school year. This is directly tied to the Trump Administration’s push for school choice, as these funds can be used for private and religious schools.
Estate taxes have been slashed.
Previously a highly-taxed source of income, beneficiaries of any estate can now double their deduction. QCBN
By David A. Snyder, CPA, PLLC
David has been in the accounting and tax business for over 19 years. His company, David A. Snyder CPA, PLLC, conveniently located in downtown Prescott, is an affiliate of E.R. Taxes, LC. He specializes in creating business plans, asset protection and tax preparation for individuals as well as corporations. To reach David call 928.445-0104 Ext.9 or email: dsnyder141414@gmail.com