It's that time of year again. Every year sees changes to the tax system, and it's no different for the 2019 tax year. Whether you're dealing with business taxes or personal taxes, make sure you're aware of the biggest changes that will impact your filing.
Before you set out to prepare your taxes (or have them prepared for you), gather up your federal and state returns from last year, as well as your 2019 W2s and 1099s. If you have other taxable events, make sure you have all necessary documents and receipts, such as property or state income tax payments, payments to charitable organizations, etc.
Additionally, If you have large medical bills that are not covered by insurance, totaling over 7.5 percent of your income, you may be able to get a deduction there, as well. This amount was scheduled to increase to 10 percent, but the increase was delayed at the last minute by The Taxpayer Certainty and Disaster Relief Act of 2019 (the “Act”) and will now remain at 7.5 percent through the 2020 tax year. However, there is no longer a penalty for not having health insurance.
The college tuition and fees deduction were also retroactively reinstated for 2018 and extended through 2020.
Similarly, the credit for energy efficient home improvements was retroactively reinstated for 2018 and extended through 2020.
The standard deduction has increased for the 2019 tax return year to adjust for inflation, and is now $12,200 for individuals, $18,350 for heads of households, and $24,400 for married couples filing jointly.
In addition to the many changes for itemizers that took effect in 2018, one new change is that alimony payments that are part of legal agreements made in 2019 or after (including changes to existing agreements) are no longer deductible. On the flip side, alimony received under an agreement made or modified in 2019 or later is no longer included in income.
This year, you’ll have until April 15 to reduce your tax bill for 2019 by maxing out your contribution to a traditional IRA (individual retirement account). The IRS is allowing up to a $6,000 contribution for the 2019 calendar year. The limit is $7,000 for people age 50 or over. Contributions can also be made to Roth IRAs for 2019 until April 15, but this won't lower your tax bill, as these contributions are taxed up front.
New rules for those over age 70 regarding making IRA contributions or taking mandatory distributions, that were enacted in the "Secure Act," will not go into effect until 2020 tax returns.
There were some big changes that went into effect in the 2018 tax year that businesses need to keep in mind once again.
The Tax Cuts and Jobs Act (TCJA) cut the top corporate income tax rate from 35 percent to 21 percent. It also eliminated the graduated corporate rate schedule and the corporate alternative minimum tax.
For pass-through businesses (sole proprietorships, partnerships, or S-corporations), new provisions were also enacted in the TCJA.
Among these was the new deduction for qualified business income (QBI). This deduction continues for 2019, but with different threshold amounts. For 2019 income tax returns, taxpayers filing jointly with taxable income below $321,400 can deduct 20 percent of their QBI. For single filers, the threshold is $160,700. These amounts will continue to be adjusted for inflation for 2020 tax year returns.
Also, for pass-through businesses, the deductible loss limit is now $250,000 if you file as a single taxpayer or $500,000 for joint filers.
The TCJA also eliminated the carryback of net operating losses (NOLs) for most taxpayers. Now, NOLs can only be carried forward, and are limited to 80 percent of taxable income.
You can no longer deduct transportation benefits as "qualified fringe benefits," but qualified bicycle commuting reimbursements are still able to be deducted for 2019 returns, although they must also be included in employee wages. These changes are expected to continue through the 2025 tax year.
Moving expense reimbursements must be included in employees’ wages for 2019 returns.
The new employer credit for paid family and medical leave continues for the 2019 tax year but will end prior to the 2020 tax year.
The TCJA also enacted new provisions for those who conduct business internationally that continue for 2019 tax returns.
For those who are part of the "gig economy," the IRS launched a new Gig Economy Tax Center to help folks navigate the ins and outs of tax law surrounding this growing part of work culture.
Regardless of whether you're concerned about changes to personal taxes or business taxes, it is highly recommended that you consult with a tax professional to be sure you are getting the best advice on how to proceed ahead of Tax Day. [cite::171::cite] [cite::172::cite]