The Internal Revenue Service just changed its tax rates for 2019, but taxpayers need not panic.
The IRS’s newly released rates and figures are simply adjusted for inflation, as it does every year.
The changes are a mere blip compared to the ones that taxpayers experienced in December 2017, when the Tax Cuts and Jobs Act, the largest revision to tax law in decades, became law.
The inflation-adjusted rates also don’t take effect until Jan. 1, which means taxpayers will not use these figures for their 2018 tax returns filed in 2019. The changes will generally affect returns filed in 2020, the IRS said.
Here are the adjusted rates:
• The standard deduction for single taxpayers and married individuals filing separately is increasing $200 to $12,200, and for married individuals filing jointly, the increase is $400, up to $24,400. The standard deduction for heads of households will be $18,350, a $350 increase.
• The tax brackets have also been adjusted slightly for inflation:
• 27% for individual single taxpayers with incomes over $510,300 ($612,350 for married couples filing jointly)
• 35% for income over $204,100 ($408,200 for married couples filing jointly)
• 32% for incomes over $160,725 ($321,450 for married couples filing jointly)
• 24% for incomes over $84,200 ($168,400 for married couples filing jointly)
• 22% for incomes over $39,475 ($78,950 for married couples filing jointly)
• 12% for incomes over $9,700 ($19,400 for married couples filing jointly)
• 10% for incomes of $9,700 or less ($19,400 for married couples filing jointly)
•The Alternative Minimum Tax exemption amount is $71,700 and begins to phase out at $510,300 for single taxpayers ($111,700 for married couples filing jointly, where a phase out begins at $1,020,600).
• The Earned Income Credit amount is $6,557 for taxpayers filing jointly who have three or more qualifying children, up from $6,431 for tax year 2018.
• The monthly limit for the qualified transportation fringe benefit and qualified parking benefit is $265, up from $260. The limit for employees’ contributions to health flexible spending arrangements increased $50 to $2,700.
• The “individual mandate,” the penalty for not maintaining minimum health insurance coverage, has been eliminated under a provision of the Tax Cuts and Jobs Act.
Other changes, including those to the Lifetime Learning Credit, foreign earned income and self-only coverage in a Medical Savings account, can be found here.
The personal exemption for 2019 remains at $0 as part of the Tax Cuts and Jobs Act.
Even though these exemptions have disappeared, families with younger children haven’t been too heavily affected, said Wes Brown, a financial adviser at Rather & Kittrell Wealth Management in Knoxville, Tenn. “They’ve gained a bigger child tax credit that’s partially refundable and their marginal tax bracket is going to be lower,” he said. Losing the personal exemption will likely have an impact on older married couples with no dependent children, who won’t see a tax benefit from having a mortgage and paying investment adviser fees.
The IRS also announced it’s using a new method for making adjustments for inflation, which will follow a slower-moving measure of inflation and could affect how much Americans’ owe in taxes in the long-term. The change could cost taxpayers $133.5 billion over a decade, according to Congress’s Joint Committee on Taxation.
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