CHANGES FOR TAX YEAR 2019
NOTE: Congress has significantly changed the Federal Tax law for tax years 2018 and 2019.
How Will the Tax Cuts and Jobs Act Impact Me:
The rates for taxable income have dropped. Most taxpayers will experience a tax break. Some of the changes will increase taxable income and some of the changes will reduce taxable income. In the past you may have been able to claim several exemptions (a personal exemption for yourself and an exemption for every other person claimed on your return). Each exemption that you were able to claim reduced your taxable income. Exemptions are no longer available (this started in tax year 2018). However, the loss of exemptions has been offset by a significant increase in the standard deduction. The standard deduction for tax year 2019 has increased to $12,200 for single filers. Married couples filing jointly may claim a $24,400 standard deduction. This change reduces the number of people who will itemize deductions.
For those who do itemize deductions: state, local, and property tax is limited to $10,000. Mortgage interest can be deducted on mortgages up to $750,000 and medical expenses will continue to be deductible.
Taxpayers who are eligible for child tax credit may be able to claim as much as $2,000 per child less than 17 years of age.
Go to Healthcare.gov for detailed information about the credit and how it works.
For additional information about the future impact of the Affordable Care Act, visit Affordable Care Act Tax Provisions on the IRS website.
IRS Monthly News Releases
Adjust your witholding
You can adjust the withholding amount and the allowances you are claiming by completing a new Form W-4, Employee’s Withholding Allowance Certificate, and giving it to your employer. Recent tax changes or personal changes such as marriage or divorce, birth of a child, and changes in employment or income may mean that too little or too much tax is being withheld. If you need to have more money taken out of your paycheck, reduce the number of withholding allowances, or figure the additional amount of money that you would like withheld each pay period.
Affordable Care Act
Several parts of the Affordable Care Act, also known as Obamacare, will continue to change and they could impact your tax situation.
A “premium assistance credit” is available for taxpayers who get qualifying health insurance through a state or federal exchange. This is often referred to as a subsidy. Taxpayers whose income is between 100% and 400% of the federal poverty line may qualify if they do not have employer coverage. How much credit a taxpayer receives will depend on their specific circumstances.
Premium Assistance Credit
The premium assistance credit will either be paid directly to the insurance company (resulting in lower monthly payments) or claimed when a taxpayer files their federal tax return. There may be a difference between what a taxpayer receives in terms of lower health premiums and the credit that they may be entitled to. This will be resolved when the taxpayer files their tax return. If the taxpayer receives more than they are entitled to, they will be required to pay back some money when they file their return. Any possible “credit” would first be used to reduce tax liability. If the tax liability is reduced to zero and some of the credit remains, it will be paid as a tax refund or applied to estimated taxes for the next tax year.