April 2020 is fast approaching. That means that you will need to prepare your 2019 tax return, if you have not started already. As you likely know, certain facets of federal tax income tax change annually, such as retirement account contribution limits and the amount of a standard deduction.
Typically, those changes are in place to adjust for inflation. Yet, there are also some non-inflation related changes that you will see in your 2019 taxes. In fact, some parts of the 2017 tax reform bill did not take effect until 2019.
In this article, we will discuss some of those new changes in your 2019 tax return. Of course, if you have additional questions about tax issues, or if you are getting correspondence from the IRS with regard to taxes that you owe from prior years, we welcome you to call the tax attorney in Florida ready to help you, Mary King.
The Law Office of Mary King, P.L. provides complete IRS problem-solving services including all areas from tax debt settlement to planning the most efficient tax strategy for individuals and businesses. Call today at 941-906-7585, or fill out our contact form.
1. No Tax Deduction for Alimony Payments
One of the bigger changes coming into effect for 2019 tax returns is the removal of the alimony deduction for divorced people. If your divorce was complete on after January 1, 2019 then your tax status for alimony will be completely different in the past. Specifically, the 2017 tax reform law provides that the person paying alimony will no longer get to deduct that amount from their gross income. In addition, the person receiving the alimony will no longer have to claim it as income on their tax return.
This change will, as you might expect, alter the incentives when it comes to divorce and divorce law. Before the change in the law, high-income earning spouses would agree to a particular alimony amount because there would be his or her ability to deduct the alimony amount at the end of the year. However, now divorce settlements might be a bit more challenging if those paying alimony are not able to deduct those payments.
Thus, if you obtained your final divorce decree in 2019, then you will need to be aware that you cannot deduct your alimony payments. If you are an alimony recipient, then you no longer need to claim it as income, which can be a big help for those individuals.
2. Affordable Care Act Individual Mandate Penalty Is Out
If you have been following the ongoing saga involving the Affordable Care Act, then you may have heard of the term “individual mandate penalty,” otherwise known as the “shared responsibility payment.”
The individual mandate payment was a part of the Affordable Care Act as a way of incentivizing people to obtain health insurance coverage, so that the cost of the overall program would be affordable for all citizens who need it. It was also put in place so that uninsured people would not be inclined to use inefficient, and very costly, health care options in an emergency. Those who were required to pay the individual mandate payment would do so in their tax returns at tax time.
However, the tax reform law in 2017 removed that individual mandate requirement. Therefore, taxpayers do not need to pay any penalty for refusing to obtain health insurance through the Affordable Care Act or other insurance options.
While most of the tax reforms in the 2017 law took effect in 2018, the removal of the individual mandate payment did not go into effect until 2019. So, for this tax year, those who did not have health insurance in 2019 do not owe the individual mandate, or shared responsibility, payment when they file their tax returns in 2020.
3. IRA Account Contribution Limits Raised
As with most years, you are now able to put more into your retirement account than you could last year. The contributions you make to accounts, such as 401(k) plans and traditional individual retirement accounts (IRAs) are deductible from your tax return this year.
The 2019 contribution limits are $6,000 for IRAs, and $19,000 for 401(k)s, which is up from the 2018 numbers of $5,500 and $18,500, respectively.
There is also a “catch-up” contribution for taxpayers who are 50 years old or older. The “catch-up” contribution allows a person to contribute a little extra money into a retirement account to make up for not contributing enough earlier on in life. For 2019, however, the “catch-up” contribution has not changed. As with the 2018 tax year, it is $1,000 more than the regular contribution limit for IRAs, and $6,000 for 401(k)s.
4. Slight Increase to HSA Contribution Limits
A healthcare savings account (HAS) is very much like a personal savings account, but it can only be used for qualified healthcare expenses. The contributions to an HSA are tax deductible.
While an HSA has some attractive tax advantages, you are not eligible to have an HSA unless you are enrolled in a high-deductible health plan, which can be challenging for individuals who expect to have significant healthcare expenses in the future.
That said, the 2019 contribution limits for those with HSA accounts have increased slightly from 2018. For Self-only coverage, the limit has gone from $3,450 to $3,500; and for Family coverage, the limit has gone from $6,900 to $7,000.
5. Higher Standard Deductions
One of the bigger changes resulting from the 2017 tax reform law was a significantly increased standard deduction. That increase was realized in 2018. Now, the increases are back to being incremental. They are as follows:
1. Married filing jointly: $24,400 (was $24,000 in 2018)
2. Married filing separately: $12,200 (was $12,000 in 2018)
3. Head of household: $18,350 (was $18,000 in 2018)
4. Single: $12,200 (was $12,000 in 2018)
Remember, the information in this blog is just for your information, and cannot be relied upon as tax or legal advice.
As you work on your 2019 tax return and confront any issues with the IRS, be sure to get the help of a qualified tax attorney in Florida or other tax professional.
Get the Help You Need by Contacting a Tax Attorney in Florida
The Law Office of Mary King P.L., a seasoned tax attorney in Florida, offers complete IRS problem solving services including all areas from tax implications of alimony to planning the most efficient tax strategy for individuals and businesses. Call our tax attorneys in Florida today to schedule an initial consultation. With years of experience, the Law Office of Mary E. King can make sure that your tax issues are resolved in your favor. Fill out our online contact form, or call us at 941-906-7585.