One of the biggest changes in the history of the tax code took place starting for the 2018 tax year. A lot of people were caught off guard with the changes made and didn’t know what to expect. For the 2019 tax year, we are trying to get one foot out in front to make sure everyone knows what to expect.
To start, if you didn’t make any changes after filing your return last year, and your income stayed about the same, do not expect a big difference this year. Most of the population saw their federal withholdings decrease last year, putting more money in their pockets for the year. However, this resulted in a surprise come tax time because people didn’t have the withholdings they were used to in the past. The most common advice given was to increase your federal withholdings to your employer if you wanted your tax bill/refund to look like it did in the past.
Even though most changes took place in 2018, there are a few changes that had a 2019 start date. One of the biggest changes for 2019 is the elimination of the individual mandate penalty. In other words, there is no penalty for not having health insurance anymore. If you have not had health insurance in the past, and have paid that penalty, you will not have to pay it going forward.
Starting in 2019 there is no more deduction for alimony payments. This is only for divorce and separation agreements that are made or modified in 2019 and thereafter. Since there is no longer a deduction for alimony payments, there is also no more recognition of alimony as income. So, depending on what side of the separation you are on, this could be good or bad news for you.
If you are looking forward and planning for retirement, the contribution limits have increased for 2019 as well. The IRA base contribution limit is now $6,000, with a catch-up contribution of an additional $1,000 for taxpayers over 50. The IRA contribution limit is a big deal for those that contribute as it hadn’t seen a raise since 2013. The 401k base contribution has also increased to $19,000, with an additional $6,000 for taxpayers over 50.
If you have any questions about your tax return, retirement, or want to plan for 2019 before you file, let us know and we will be happy to work with you. Call us now before the end of the year so we can help you plan and make any changes before it is to late.