2019 Tax Perks and Pitfalls, Part 1

2019 Tax Perks and Pitfalls, Part 1

We’re almost done with the 2019 tax season, and while fall sports and the upcoming holidays are probably higher up on your list, it’s important to spend a little time now thinking about your 2019 returns that you’ll be filing early next year.

This year, the Tax Cuts and Jobs Act created changes in nearly everyone’s tax liability, whether positive or negative. Next year won’t be nearly as dramatic in terms of changes, but there are still some perks and pitfalls you’ll want to keep in mind, as well as some that may disappear in 2020. In a follow-up article, I’ll also talk about some perks that kick in for next year’s tax season, because, hey, we accountants like to think ahead.

As you’re blocking out your calendar for the rest of the year, set aside some time for us. We can’t do much for your 2019 returns after Dec. 31, but there’s still time to make adjustments this year.

Perk: standard deduction increase.

In 2019, the standard deduction is up from $12,000 to $12,200 for singles and from $24,000 to $24,400 for those filing jointly. In 2018, the standard deduction nearly doubled, meaning most people chose that route over itemizing. This year’s change is comparatively minor but it can still make a difference in adjusting your tax rate.

Pitfall: increased medical expense deduction threshold.

The threshold for deducting medical expenses is back up to 10 percent of adjusted gross income, from 7.5 percent in 2018. If you have a significant amount of unreimbursed medical and dental expenses, they’ll now have to total more than 10 percent of your adjusted gross income to qualify as a deduction. If you are planning on itemizing, this will make it a little tougher.

Perk or Pitfall: alimony is no longer deductible to the payer and no longer taxable to payee.

This one really depends on whether you’re on the giving or receiving end of alimony payments. Note, too, that this only applies to divorces or separations effective after Jan. 1, 2019.

Perk: the health insurance mandate ends.

This means there’s no longer a penalty if you don’t carry health insurance.

Perk: If you’re a business owner, you get a credit for Family Medical Leave.

This is the last year you can receive the employer credit for Family Medical Leave. While this should lower your tax liability for 2019, it’s also a potential negative change you’ll want to be prepared for in 2020.

Let’s talk

We get it: Your busy season is about to begin. But ours starts in January with thousands of tax forms that need to be filed before the March and April deadlines. Call us now to talk over your 2019 taxes and get a head start on 2020 planning.

Neal Bach, CPA

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