On January 1st of this year, many tax changes were introduced and implemented – and all tax payers are affected. Here are just some of what’s new for this year…with more changes sure to come.
The 2019 standard deductions go up a bit.
- Married couples get $24,400 plus $1,300 for each spouse age 65 and older.
- Singles claim $12,200…$13,850 if 65 or up.
- Household heads get $18,350 plus $1,650 once they reach 65.
- Blind people receive $1,300 more ($1,650 if unmarried and not a surviving spouse.)
Tax rates on long-term capital gains and qualified dividends do not change. But the income thresholds to qualify for the various tax rates go up for 2019.
- 0% rate: for individual taxpayers with taxable incomes up to $39,375 on single returns, $78,750 for joint returns and $52,750 for head-of-household filers.
- 20% rate: starts at $434,550 for singles, $461,700 for heads of household and $488,850 for couples filing jointly.
- 15% rate: for filers with taxable incomes between 0% and 20% break points.
- 3.8% surtax on net investment income kicks in for single people with modified AGI over $200,000…$250,000 for marrieds.
AMT exemptions climb for 2019. They increase to $111,700 for couples and $71,700 for both singles and heads of household. The phase-out zones for the exemptions start at higher income levels as well…above $1,020,600 for couples and $510,300 for single filers and household heads. Also, the 28% AMT tax rate kicks in a bit later in 2019…above $194,800 of alternate minimum taxable income.
The adoption credit can be taken on up to $14,080 of qualified expenses. The full credit is available for a special-needs adoption, even if it costs less. The credit phases out for folks with modified AGIs over $211,160 and ends at $251,160. The exclusion for company-paid adoption aid also increases to $14,080.
Alimony paid under the post-2018 divorce agreements is not deductible, and ex-spouses aren’t taxed on alimony they get under post-2018 agreements. Older divorce pacts can be modified to follow the new tax rules if both parties concur and they modify the agreement in 2019 or later to specifically adopt the tax changes.
ESTATES & TRUSTS
The lifetime estate and gift tax exemption for 2019 rises to $11,400,000…$22,800,000 for couples if portability is elected by timely filing Form 706 after the death of the first-to-die spouse. The estate tax rate remains steady at 40%.
You can give up to $15,000 each to a child, grandchild or any other person in 2019 without having to pay gift tax or tap your lifetime estate and gift tax exemption.
More estate tax liability qualifies for an installment payment tax break. If one or more closely held businesses make up greater that 35% of an estate, as much as $620,000 of tax can be deferred and IRS will charge only 2% interest.
The income tax brackets for trusts and estates are somewhat wider in 2019:
If income of an estate or trust The income tax is
Not over $2,600 10% of taxable income
Over $2,600 but not more than $9,300 $260 plus 24% of excess over $2,600
Over $9,300 but not more than $12,750 $1,868 plus 35% of excess over $9,300
Over $12,750 $3075.50 plus 37% of excess over $12,750
More capital gains of trusts and estates will be taxed at favorable rates.
For 2019, the 0% rate applies for trusts and estates with taxable incomes up to $2,650. The 20% rate begins at $12,951. The rate on income between these amounts…15%.
The 3.8% surtax on net investment income hits income over $12,750 in 2019.
(excerpt from The Kiplinger Tax Letter)