1. Standard DeductionThe 2019 standard deduction is $12,200 per individual and $24,400 per married couple, so most clients will now take the standard deduction rather than itemizing on their tax returns post-reform.
2. Itemized Deductions: The SALT Cap Because of the doubled standard deduction, many clients will no longer itemize when filing their 2019 tax returns.
3. New Mortgage Interest Rules The mortgage interest deduction was also limited under tax reform, so only interest on up to $750,000 on mortgage debt is deductible for new mortgages taken out between 2018 and 2026.
4. Medical Expense Deduction The 2017 tax reform legislation modified the previously existing medical expense deduction so that, for tax years beginning after December 31, 2016, and ending before January 1, 2019, a more generous 7.5% floor applied to the medical expense deduction. For 2019, the floor is once again 10%.
5. Personal and Dependency ExemptionsUnder the 2017 tax reform legislation, the personal exemption was suspended for tax years beginning after 2017 and before 2026.
6. Child Tax CreditAlthough the personal exemption was suspended for 2018-2025, the 2017 tax reform legislation increased the child tax credit to $2,000 per child under age 17.
7. Affordable Care Act Individual Mandate Repeal The 2017 tax reform legislation repealed the Affordable Care Act individual mandate that required individuals to purchase health insurance or pay a penalty for tax years beginning after December 31, 2018, so the penalty will no longer apply in 2019.
8. Charitable Giving Although the charitable contributions deduction itself was left intact, because clients are required to itemize in order to claim a deduction for gifts to charity, this means that most taxpayers will also no longer receive a deduction for charitable donations without careful planning.
9. Alternative Minimum TaxThe 2017 tax reform legislation temporarily increased the AMT exemption amount, so that in 2019, the following amounts will apply: $111,700 for married taxpayers filing joint returns (half this amount if separate returns are filed) and $71,700 for all other taxpayers (other than estates and trusts).
10. Estate PlanningUnder the 2017 tax reform legislation, the estate, gift and GST exemption amount was roughly doubled to $11.18 million per individual, and will be adjusted upward to $11.4 million for 2019.
Midway through the 2018 tax filing season, many clients are now starting to wonder what they need to know about their 2019 taxes.
The 2017 tax reform legislation brought substantial changes for almost every single client, and the most important of those changes will vary depending upon the client’s individual circumstances. As noted below, many of the changes implemented by the 2017 tax reform legislation are temporary, so clients should also be advised that the pre-reform laws may once again apply after 2025. Here are the top 10 things that individual clients need to know for the 2019 tax year.
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