“Death and taxes” are commonly said to be the only things certain in life. Despite the fact that we have to deal with them every year, taxes can change significantly. Anyone who filed in the U.S. for the 2018 tax year likely remembers the plethora of changes that came following the Tax Cuts and Jobs Act.
The good news for a lot of people is that 2019 taxes (being filed in 2020) will see far fewer changes than the previous year. Nonetheless, there are some important differences to be aware of as you prepare to file this year.
2018 Tax Changes To Remember
It has only been one year since many of the changes from the Tax Cuts and Jobs Act took place. Therefore, it may be helpful to keep a few of the most important ones in mind for your 2019 taxes.
- Standard Deduction: Perhaps the most impactful change for many people was the increase in the standard deduction. For a lot of people, this means simpler taxes because they do not need to itemize. For some, it also has meant lower overall tax obligations.
- Elimination of Tax Breaks: There were quite a few tax breaks eliminated from the IRS rules for 2018 and beyond. These include moving expense reimbursements, employee business expenses, job search expenses and more.
- SALT Cap: If you pay a lot in state and local taxes, you are likely not excited by this change. Starting last year, there is a $10,000 limit on deductions for state and local taxes.
Many other changes also came into effect last year. For many people, this has led to some confusion and uncertainty. If those changes affected you negatively, tax relief may be able to help.
End of Alimony Deductions
For the 2019 tax year, the changes were less significant but not inconsequential. One of the most notable for many people is the end of alimony deductions.
Previously, alimony was treated as a special case for previously married people. The alimony payer was allowed to deduct the payments. The payee then paid tax on alimony as part of his or her income.
Starting in 2019, this special status of alimony has been eliminated. The payer can no longer deduct the payment and the recipient does not count the alimony as income.
There are frequently minor tax adjustments to account for inflation. For 2019, these are not huge but could nonetheless help some taxpayers.
- The standard deduction for singles is now $12,200, a $200 increase. For joint filers, it is $24,400, a $400 increase.
- Similarly, the exception form the alternative minimum tax was increased to account for inflation.
- Tax brackets also increased by about 2%.
New Form for Seniors
Older taxpayers have a new form to file starting with 2019. Many people use tax preparers or software. So, this change may go relatively unnoticed. Nonetheless, it should simplify tax filing for seniors.
The IRS rule change implements the 1040-SR as the main tax filing form for Americans 65 and over. The 2018 changes had eliminated the 1040A and the 1040EZ, switching everyone to a single form, 1040. The new form for seniors, the second change in as many years, cuts down some of the complexity of filing.
No More Health Insurance Penalty
Changes for the 2019 tax year also include eliminating the penalty for not having health insurance. This penalty was related to the provision in the Affordable Care Act known as the individual mandate. If you did not have health insurance during 2019, you no longer have to pay that penalty. This will save some money for people who can’t afford or choose not to have health insurance.
Extended Tax Provisions
Several older temporary tax provisions were also extended for 2019. These include the following:
- Forgiven mortgage debt is not taxed as income.
- Private mortgage insurance payments are deductible.
- Energy-efficient homes can receive a credit of up to $500.
- Families can deduct up to $4,000 per year in tuition and fees.
Interestingly, the extensions will apply retroactively. So, you may be able to amend your 2018 tax return to receive an additional reduction of your taxes.
Getting Help When You Need It
There is no question that the rules for taxes and filing with the IRS are complicated. Whether you find yourself owing a lot or in trouble due to an error, you may need some relief. Contact Financial Rescue, LLC for tax relief services. You don’t have to solve this problem alone.