With tax season underway, people are busy gathering their financial information and necessary tax documents. This is a good time of year to brush up on any changes to the tax code, since some changes that were pushed through are material. While the Tax Cuts and Jobs Act (TCJA) brought about some monumental tax updates a few years ago, the tax code continues to evolve. This year the changes aren’t quite as drastic, however there are a few tax updates that could change your tax bill significantly.
Increase In The Standard Deduction
The standard deduction went up significantly in 2018 from the prior year due to the TCJA. This year the standard deduction increased slightly with inflation. The new standard deduction for 2019 is as follows:
- Single Filers – The standard deduction increased from $12,000 to $12,200
- Joint Filers – The standard deduction increased from $24,000 to $24,400
- Head of Household Filers – The standard deduction increased from $18,000 to $18,350
Increase In Income Threshold for AMT Exemptions
The AMT (alternative minimum tax) was designed to ensure that all taxpayers pay their fair share in taxes. The AMT targets higher income taxpayers who’s AGI is over a certain amount. In 2018, the income limit was increased significantly, excluding more taxpayers from being subject to AMT. In 2019, the income thresholds went up slightly, due to inflation. The new income limit thresholds for AMT are:
- Singles Filers – The AMT exemption went from $70,300 to $71,700
- Joint Filers – The AMT exemption went from $109,400 to $111,700
- Head of Household – The AMT exemption went from $54,700 to $55,850
Income Limits Increase For Tax Brackets
As a result of the TCJA the tax brackets saw an update to income limits. In 2019, the income limits adjusted slightly. There are still 7 tax brackets, and the percentages still vary from 10% to 37%, however the income limits were adjusted. Here are the tax brackets for 2019:
Individual Mandate Expiration
New for 2019, taxpayers in most states will no longer be charged a penalty for not having health insurance. However, if you live in: Massachusetts, New Jersey, Vermont, and DC you are still subject to the mandate, as these states have decided to still levy taxes for not having health insurance. Just note that this tax is assessed at the state level only.
Phase Out Of Alternative Vehicle Tax Credit
The alternative vehicle tax credit was designed to incentivize carshoppers to purchase alternative vehicles like plug in hybrids and electric vehicles. With the purchase of a new alternative vehicle, taxpayers could recoup some of the cost of the vehicle purchase in the form of a credit up to $7,500. The credit is only available until a manufacturer reaches 200,000 sales. In July of 2018, Tesla met this benchmark, and as a result the tax credit began to phase out in 2019. For Teslas purchased between January 1, 2019 and June 30, 2019, the tax credit decreased to $3,750. And for Teslas purchased between July 1, 2019 and December 31, 2019, the tax credit decreased to $1,875. Vehicles purchased after the new year, are no longer eligible to claim the credit.
With this being said, there are still some vehicles that are eligible for the tax credit. You can view the complete list here.
No More Alimony Deduction
Another tax update for the 2019 tax year is taxpayers will no longer be able to deduct alimony payments. At the same time, recipients of alimony payments will not be required to claim alimony payments as income. This affects divorce decrees that were signs after December 31, 2018.
Get Help With Your 2019 Taxes
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