10 TOP FEDERAL TAX CHANGES FOR 2019
1. No more personal and dependent exemptions.
The $4,050 personal exemption that taxpayers claim for themselves, spouses and dependents are no longer available in 2019. Currently, you can still deduct personal exemptions for the 2017 tax year.
2. The Standard Deduction doubles.
For 2019, the standard deduction increases to $12,000 for single and married filing separate filers, $18,000 for heads of households, and $24,000 for joint filers. It’s twice the amount of the 2017 standard deductions which were $6,350 for single and married filing separately, $9,350 for the head of household and $12,700 for joint filers. This will make it harder for taxpayers to itemize their deductions.
3 .The Child Tax Credit (CTC) increases until 2025.
For qualifying children under 17, the CTC doubles from $1,000 to $2,000. Your dependent must also have a social security number for this credit. Moreover, the TCJA combines the Additional Child Tax Credit (ACTC) with the CTC. You can then receive a refundable credit of up to $1,400 after removing your tax.
4. A new dependent credit is here.
If you want to claim a non-dependent, (meaning someone who is not a qualifying child under age 17) you can do so and receive $500 for this credit. The non-dependent must be either a full-time student or disabled.
5. State and Local Taxes (SALT) deduction have a cap of $10,000.
Beforehand, there was not a limit in place for your SALT deduction but now, there will be a noticeable difference for taxpayers with greater amounts of state and local taxes.
6. Miscellaneous itemized deductions are eliminated.
In prior years, you can deduct your itemized deductions such as unreimbursed job expenses, tax preparation fees, and other expenses as long as they exceed 2% of your adjusted gross income. In 2019, you cannot deduct expenses such as:
Moving expenses (excluding members of the armed forces)
Professional and union dues
Business liability insurance premiums
Depreciation in mandatory items such as computer or phone usage
Employee education expenses
Home office expenses
Supplies and uniforms
Tax preparation fees
It’s also recommended that you complete a new W-4 in place of this new tax law.
7. Natural disaster expense deductions are allowed only if the location is a disaster zone.
Now, you can only deduct expenses from natural disasters if it falls under a presidentially designated disaster zone.
8. No more alimony deductions.
The TCJA declares that you cannot deduct your alimony payments on your tax return. This means that divorcees who make alimony payments can no longer deduct that amount on their federal taxes. This applies to divorces after December 31, 2018.
9. Mortgage interest deduction receives a cap of $750,000.
Prior to this, taxpayers could deduct up to $1 million in mortgage interest whereas now, it’s cut by 25%. On top of that, the new cap of $750,000 applies to residences purchased after December 15, 2017.
10. The Home Equity Interest Deduction disappears.
For 2018-2025, the interest you pay on home equity loans and lines of credit are no longer available. However, the IRS states that they are still deductible as long as they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.
For example, you cannot deduct the use of the loan for credit card debt and living expenses. The loan must also be a qualified residence such as a homeowners’ main or second home and not exceed the cost of the home.