Tax season is upon us once again. Many people dread filing their taxes each year because they have so many documents to keep track of. The largest tax reform legislation in 30 years was recently passed by federal lawmakers. This bill went into effect on January 1, 2018. It will affect most taxpayers for the 2019 tax year. This guide will help you gather all the information required to file your federal tax returns for 2019.
What This Means To Taxpayers
The bill will lower tax rates and change the income ranges for all taxpayers. It will change the income thresholds on how rates will apply. Income tax brackets before the change were 10, 15, 25, 28, 33, 35 and 39.6 percent. The new brackets for 2019 are 10, 12, 22, 24, 32, 35 and 37 percent. Income thresholds that these brackets apply have changed.
Married joint filers will pay taxes on the following income levels with rates.
$0 - $19,050 at a 10 percent tax rate
$19,051 - $77,400 at a 12 percent tax rate
$77,401 - $165,000 at a 22 percent tax rate
$165,001 - $315,000 at a 24 percent tax rate
$315,001 - $400,000 at a 32 percent tax rate
$400,001 - $600,000 at a 35 percent tax rate
$600,001 or higher at a 37 percent tax rate
Single filers will pay taxes on these income levels with rates.
$0 - $9,525 at a 10 percent tax rate
$9,526 - $38,700 at a 13 percent tax rate
$38,701 - $82,500 at a 22 percent tax rate
$82,501 - $157,500 at a 24 percent tax rate
$157,501 - $200,000 at a 32 percent tax rate
$200,001 - $500,000 at a 35 percent tax rate
$500,001 or higher at a 37 percent tax rate
More Tax Relief For Families And Individuals
The new bill almost doubles the amounts for the standard deduction. Filing single will see an increase to $12,200 for 2019 taxes. Married couples filing jointly will see an increase to $24.400 for 2019 taxes. Fewer taxpayers will need to itemize taxes under the new law.
The alternative minimum tax level has risen as well. For married couples filing jointly, the income exempted is raised to $111,700. Single filer’s new exempted income was raised to $71,700. This will mean fewer taxpayers will have to pay for the 2019 tax year.
The child tax credit has doubled for families with children. It was raised from $1,000 up to $2,000. The refundable amount saw an increase from $1,100 to $1,400. A new $500 non-refundable credit was introduced into the bill for dependents other than children. It increased the income threshold from $110,000 for a married couple to $400,000 where the benefits phased out.
No personal or dependent exemptions will be needed for the 2019 tax-filing season under the new law. The bill limits state, property, income, and sales taxes that are deducted to $10,000. These taxes used to be fully deductible. New tax laws capped interest on new home purchases at $750,000 from the old amount of $1,000,000.
Health Care Changes
The new bill eliminated the old tax penalty for failing to have health insurance during the tax year. The ceiling for medical expenses that people deducted is set at 7.5 percent. It will increase to 10 percent for the 2020 tax season. Taxpayers can deduct medical expenses that are higher than 7.5 percent of their adjusted gross income.
Businesses And Self-Employed
People operating a business set up as a C corporation will see a reduction in corporate rates to 21 percent. Small businesses will see a 20 percent deduction for income from partnerships and sole proprietorships. The alternative minimum tax is eliminated for the 2019 tax season.
The rates for pass-through entities remain the same as the business owner’s personal tax rate. The top rate for single taxpayers making more than $518,400 is 37 percent. Couples filing joint returns making more than $622,050 will pay 37 percent. The other rates are listed below.
Over $207,350 at 35 percent
Over $163,300 at 32 percent
Over $85,525 at 22 percent
Over $9,875 at 12 percent
$414,700 for couples filing jointly at 35 percent
$326,600 for couples filing jointly at 32 percent
$171,050 for couples filing jointly at 24 percent
$40,125 for couples filing jointly at 22 percent
$19,750 for married couples filing jointly at 12 percent
The amount of income, age and filing status has everything to do with filing. The minimum amount for self-employed is $400 across the board. Minimum income amounts are listed below to help people decide whether they need to file for 2019.
Single under 65 years of age is $12,200
Single over 65 years of age is $13,850
Head of a household under 65 years of age is $18,350
Head of a household over 65 years of age is $20,000
Married filing jointly with both spouses under 65 is $24,400
Married filing jointly with one spouse over 65 is $25,700
Married filing jointly with both spouses over 65 is $27,000
Married filing separately is $5
A qualified widow with child dependents is $24,400
A qualified widow 65 or older with child dependents is $25,700
People that don’t meet the income requirements might want to file a tax return for other reasons. They may have paid taxes withheld from paychecks that require a tax return to be filed to receive s refund. They might qualify for the Earned Income Tax Credit. The Health Coverage Tax Credit is available for those that qualify. Qualified children can help taxpayers receive a refund through the Child Tax Credit. The Earned Income Tax Credit is another refund for those that qualify.
Make sure to have all the documents needed to file a tax return form. Many taxpayers prefer to hire someone to fill out the tax form information for them. W2 or 1099-forms are important as they list yearly income amounts. Business owners need expense records to help them fill out tax forms accurately.
The tax reform bill should be a benefit to most everyone that files 2019 taxes. Gathering all the documents with information will make it a smooth process for all of those involved.