01/27/2019
Here are some of the most prominent changes that could affect you.
Most Small Businesses Can Now Enjoy a 20% Business Income Deduction
If your taxable income is less than $157,500 for individuals, or $315,000 for married taxpayers filing jointly, then your deduction is generally 20% of the net income of your business. If your taxable income is higher than these threshold amounts, then you still get a deduction but limitations and exceptions apply based on your occupation and wages.
Standard deductions
Married joint filers: $24,000, up from the $13,000 it would have been under previous law.
Single taxpayers and those who are married and file separately: $12,000, up from the $6,500.
For heads of households: $18,000, up from $9,550.
Personal exemptions, which were eliminated from 2018 through 2025 as part of the Tax Cuts and Jobs Act, will remain at zero.
Child tax credit
The child tax credit: $2,000 per qualifying child, those who are under 17, up from $1,000. A $500 credit is available for dependents who do not get the $2,000 credit.
Estate tax
The estate exemption doubles to $11.2 million per individual and $22.4 million per couple in 2018.
Mortgage interest
The deduction for interest is capped at $750,000 for mortgage loan balances taken out after Dec. 15 of last year. The limit is still $1 million for mortgages that were established prior to Dec. 15, 2017.
State and local taxes
The itemized deduction is limited to $10,000 for both income and property taxes paid during the year.
Insurance penalties
Filers should take note that in 2019, the IRS will do away with the individual mandate — the fine that people pay for failing to maintain qualifying health insurance coverage.
On a per-person basis, this penalty added up to $695 per adult and $347 per child under age 18.
Contribution limits for retirement savings
Employees who participate in certain retirement plans ‒ 401(k), 403(b) and most 457 plans, and the Thrift Savings Plan – can now contribute as much as $18,500 this year, a $500 increase from the $18,000 limit for 2017.
Savings in IRAs
If you have an IRA, you can put away $6,000 in annual contributions in 2019. That's up from $5,500. Catch-up contributions for savers age 50 and older remain at $1,000.
Savers who contribute to individual retirement accounts will have higher income ranges following cost-of-living adjustments. Note that the deduction phases out for individuals and their spouses who are covered by workplace retirement plans.
For single taxpayers, the limit will be $63,000 to $73,000.
For married couples, the phaseout range will vary depending on whether the IRA contributor is covered by a workplace retirement plan or not. When the spouse who is investing has access to an employer plan, the range is $101,000 to $121,000. For individuals who don't have a retirement plan but are married to someone who does, the phaseout has been raised to $189,000 to $199,000.
The phaseout was not adjusted for married individuals who file a separate return and who are covered by a workplace retirement plan. That range is $0 to $10,000.
