The Tax Cuts & Jobs Act: What you need to know for 2019 taxes

Dec 23, 2019 | Tax

The Tax Cuts and Jobs Act was the most significant set of changes to the U.S. tax code in several decades. Most changes went into effect with the 2018 tax year. Here is what you need to know for the 2019 tax year filing:

  • Standard deduction is as follows:
    • Single $12,200
    • Married filing joint $24,400
    • Head of household $18,350
  • Medical expense deduction threshold is 7.5% of adjusted gross income.
  • SALT Deduction (State and Local Tax Deduction) including such items as state income and real estate taxes is capped at $10,000, or $5,000 if married filing separately.
  • Mortgage interest deduction is limited to interest paid during the year on the first $1,000,000 of qualified mortgage debt obtained prior to December 16, 2017. If the mortgage was obtained after December 15, 2017, then the mortgage interest deduction is limited to interest paid during the year on the qualified mortgage debt of $750,000.
  • Charitable contributions are generally limited to 60% of your adjusted gross income (AGI), but in some cases 20%, 30% or 50% limits may apply. Standard mileage rate is 14 cents per mile driven in service of charitable organizations.
  • The Tax Cuts and Jobs Act has eliminated the individual mandate for health insurance for Federal purposes.
  • NJ health insurance mandate requires its residents to maintain health coverage throughout 2019 and beyond. Failure to have coverage may result in a shared responsibility payment.
  • Miscellaneous itemized deductions are generally limited to the following:
    • Gambling losses only to the extent of gambling winnings.
    • Casualty and theft losses on income-producing property including Ponzi-type investment schemes; Casualty and theft losses on personal-use property only if the loss is attributable to a federally declared disaster.
    • Federal estate tax on income in respect of a decedent.
    • Amortizable bond premiums on taxable bonds.
    • An ordinary loss attributable to a contingent payment debt instrument or an inflation-indexed debt instrument.
    • Deduction for repayment of amounts under a claim of right if over $3,000.
    • Certain unrecovered investment in an annuity.
    • Impairment-related work expenses of a disabled person.
    • Unreimbursed employee expenses of Armed Forces Reservists, performing artists, or fee-basis state or local government officials.
    • Certain fines or penalties.
    • Unlawful discrimination claims.
    • Moving expenses for only armed forces on active duty who move pursuant to military order and incident to a permanent change of station. Mileage reimbursement for moving expenses is 20 cents per mile.
  • Standard business mileage deduction for 2019 is 58 cents per mile.
  • Child tax credit is $2,000 per qualifying child under the age of 17 at the end of the tax year.
  • NJ Veterans Exemption has doubled to $6,000.
  • Qualified business deduction allows taxpayers to deduct up to 20% of their qualified business income. Phase out range for specified services trades or business (SSTB) for 2019 starts at taxable income of $321,400 for married filing jointly and completely phased out at $421,400. Married filing separate (SSTB) phase out range is $160,700 to $210,725. For all other filings, phase out range starts at $160,700 and completely phases out at $210,700. If your business income is not from an SSTB then there is no phase out of the deduction, but a wage/investment limitation applies once income thresholds are met.
  • Required minimum distributions from certain retirement accounts must begin at age 72, from age 70 ½.  The new rule applies to people who turn 70 ½ after December 31, 2019.
  • If you inherit an IRA or 401(k) account from someone, other than your spouse, who dies after December 31, 2019, you generally must deplete the account within 10 years.   Previously, required minimum distribution or 5 year distribution rules applied to non-spouse beneficiaries.
  • The maximum age for IRA contributions, which was 70 1/2, has been repealed.
  • Exclusion from gross income for the discharge of qualified principal residence indebtedness has been extended.
  • Mortgage insurance premium deduction has been extended.

These are some of the changes that are in effect for the tax year 2019. If you have any questions, do not hesitate to contact us directly.

This article was contributed by Joseph P. Marino, CPA

Photo by Michael Longmire on Unsplash

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