Tax Changes in 2018 & 2019

Tax Changes in 2018 & 2019

Quick Reference Guide for 2019 and 2018 Federal Taxes

The following guide includes many of the most important federal tax amounts for 2019 and compares them to the amounts currently applicable for 2018 tax returns.

Federal Income Tax Rates

2019

2018 1

Maximum individual income tax rate

37%

37%

Individual tax rates (seven brackets)

10%, 12%, 22%, 24%,32%, 35%, 37%

10%, 12%, 22%, 24%, 32%, 35%, 37%2

Taxable income beyond which top rate begins:

Married filing jointly and surviving spouse

Single

Head of household

Married filing separately

$612,350

$510,300

$510,300

$306,175

$600,000

$500,000

$500,000

$300,000

Maximum rate for qualified capital gains and dividends

20%

20% 3

Maximum corporate income tax rate

21%

21%

Standard Deduction

2019

 2018

Married filing jointly and surviving spouse

$24,400

$24,000

Single and married filing separately

$12,200

$12,000

Head of household

$18,350

$18,000

Alternative Minimum Tax (AMT) Exemption Amounts

2019

 2018

Exemption, married filing jointly and surviving spouse

(Phase-out begins)

$111,700

($1,020,600)

$109,400

($1,000,000)

Exemption, single

(Phase-out begins)

$71,700

($510,300)

$70,300

($500,000)

Exemption, married filing separately

(Phase-out begins)

$71,700

($510,300)

$70,300

($500,000)

Exemption, estates and trusts

(Phase-out begins)

$25,000

($83,500)

$24,600

($82,050)

Health Savings Account Contribution Limits

2019

 2018

Individual Plan

$3,500

$3,450

Family Plan

$7,000

$6,900

55+ Additional

$1,000

$1,000

Deductions

2019

 2018

Deduction for pass-through entities 4

Percentage of qualified business income

Limit: 50% W-2 wages, or 25% wages + 2.5% of property’s unadjusted basis

20%

20%

Deduction for state and local taxes

Sales or state income taxes

Deduction for property taxes

$10,000 total

$10,000 total

Deduction for medical expenses

>10% of AGI

>7.5% of AGI 5

Maximum cash donations to public charities (income-based limit)

60%

60%

Maximum mortgage debt for mortgage interest deduction

$750,000

$750,000 6

Maximum nontaxable IRA distributions to charities, if at least age 70 ½

$100,000

$100,000

Maximum deduction for teacher classroom expenses

$250

$250

Maximum American Opportunity education credit

$2,500

$2,500

Driving deductions, per mile:

Business mileage

Charitable mileage

Medical and moving mileage

Pending

Pending

Pending

54.5¢

14.0¢

18.0¢

Deduction for alimony

None 7

Not limited

Business Equipment

2019

2018

Maximum Section 179 expense deduction

$1,020,000

$1,000,000

Phase-out for Section 179, based on asset additions

$2,550,000

$2,500,000

Bonus first-year depreciation

100%

100% 8

Qualified Transportation Fringe Benefit Exclusion 9

2019

 2018

Commuter highway vehicle and transit pass, per month

$265

$260

Qualified parking, per month

$265

$260

Domestic Employees

2019

 2018

Annual threshold when a domestic employer is liable to withhold and pay FICA for babysitters, housekeepers, etc.

$2,100

$2,100

Kiddie Tax

2019

 2018

Net unearned income not subject to kiddie tax

$2,200

$2,100

Earned income tax rate

Single individual

Single individual

Net unearned income tax rate

Trust and estate

Trust and estate

Exclusions and Credits

2019

 2018

Exclusion of gain on qualified small business stock (QSBS)

100%

100%

Exclusion of foreign income

$105,900

$103,900

Child tax credit, per child

$2,000 with

$1,400 refundable

$2,000 with

$1,400 refundable

Federal Estate and Gift Tax

2019

 2018

Maximum tax rate

40%

40%

Estate/gift exemption amount (double for married couple)

$11.4 million

$11.18 million

Annual gifting limit, per recipient (double for married couple)

$15,000

$15,000

Miscellaneous

2019

 2018

Affordable Care Act insurance mandate

Repealed

Required

Hospital insurance tax (on income > $250,000 for married couples

and $200,000 for single persons)

0.9%

0.9%

Social Security and Medicare

2019

2018

Social Security taxable wage base

$132,900

$128,400

Social Security tax:

Employee

Self-employed

6.2%

12.4%

6.2%

12.4%

Medicare taxable wage base

No limit

No limit

Medicare tax:

Employee

Self-employed

1.45%

2.9%

1.45%

2.9%

Medicare surtax on net investment income

3.8%

3.8%

Individual Retirement Accounts

2019

 2018

Individual IRA, up to 100% of earned income (combined limit for traditional and/or Roth)

$6,000

$5,500

Additional annual catch-up contributions for account owners, age 50 and older (Roth and traditional IRA)

$1,000

$1,000

Annual Qualified Plan Limits

2019

 2018

Maximum compensation used to determine contributions

$280,000

$275,000

Deferral limits for plans:

§401(k) and §403(b)

SIMPLE

§457

$19,000

$13,000

$19,000

$18,500

$12,500

$18,500

Additional catch-up contributions for employees, age 50 and older:

§401(k) and  §403(b)

SIMPLE

§457

$6,000

$3,000

$6,000

$6,000

$3,000

$6,000

Highly Compensated Employee threshold

$125,000

$120,000

Compensation defining Key Employee in top-heavy plan

$180,000

$175,000

Compensation triggering Simplified Employee Pension (SEP) contribution requirement

$600

$600

Maximum annual addition for Defined Contribution Plan

$56,000

$55,000

Maximum annual benefit for Defined Benefit Plan

$225,000

$220,000

Disclaimer:

This document provides a general summary of the provisions of the Tax Cuts and Jobs Act (renamed “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”). Specific provisions may be more detailed and complex — with various limitations, thresholds, phase-ins, phase-outs and other exceptions. Contact your tax advisor to discuss how provisions of the Act apply to your personal tax situation.

Notes

1 - Unless otherwise noted, all federal individual income, estate and gift tax changes under the Act are temporary. The current rules and rates are suspended and the Act’s rules apply beginning January 1, 2018. The federal tax rules for individuals revert back to the pre-Act tax rates and rules after 2025. The Act’s corporate tax changes, however, are a mix of permanent changes and temporary suspensions.

2 - The maximum income levels for various brackets have increased, further reducing applicable tax rates.

3 - New three-year holding period required for carried interest preference. Also, the maximum income levels for various brackets has increased, further reducing applicable tax rates.

4 - It’s a complex calculation, subject to various limitations, phase-ins, thresholds and exclusions. The deduction is not applicable to most professional service businesses, except for those individuals with taxable income under $157,500 ($315,000 for married couples).

5 - Applies to 2017 and 2018 only.

6 - Applies to mortgage debt incurred after December 15, 2017, excluding refinancing of original debt.

7 -  Alimony will no longer be deductible beginning in 2019. Similarly, the spouse/recipient will not include alimony in income. The change applies to divorce or separation agreements executed or amended after December 31, 2018. Earlier agreements with payments made in 2019 are not affected.

8 -  Applies to property acquired and placed in service after September 27, 2017.

9 - Excluded from employee income, but no longer deductible by the employer.