IRS Provides Tax Inflation Adjustments for Tax Year 2019
As is usual this time of the year the IRS advises the tax practitioner community and taxpayers of the upcoming 2019 inflation increases to such items as tax rate brackets, Standard Deductions and Exemptions and applicable phase out ranges for each, IRC Sec 911 Foreign Earned Income Exclusion, IRC Sec 877(A) Expatriation provisions 5 year annual income tax payable threshold and Expatriation Exemption amount, and much more…
The Internal Revenue Service today announced the tax year 2019 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2018-57 provides details about these annual adjustments. The tax year 2019 adjustments generally are used on tax returns filed in 2020.
The tax items for tax year 2019 of greatest interest to most taxpayers include the following dollar amounts:
- The standard deduction for married filing jointly rises to $24,400 for tax year 2019, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,200 for 2019, up $200, and for heads of households, the standard deduction will be $18,350 for tax year 2019, up $350.
- The personal exemption for tax year 2019 remains at 0, as it was for 2018, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
- For tax year 2019, the top rate is 37 percent for individual single taxpayers with incomes greater than $510,300 ($612,350 for married couples filing jointly). The other rates are:
o 35 percent, for incomes over $204,100 ($408,200 for married couples filing jointly);
o 32 percent for incomes over $160,725 ($321,450 for married couples filing jointly);
o 24 percent for incomes over $84,200 ($168,400 for married couples filing jointly);
o 22 percent for incomes over $39,475 ($78,950 for married couples filing jointly);
o 12 percent for incomes over $9,700 ($19,400 for married couples filing jointly).
o The lowest rate is 10 percent for incomes of single individuals with incomes of $9,700 or less ($19,400 for married couples filing jointly).
- For 2019, as in 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
- The Alternative Minimum Tax exemption amount for tax year 2019 is $71,700 and begins to phase out at $510,300 ($111,700, for married couples filing jointly for whom the exemption begins to phase out at $1,020,600). The 2018 exemption amount was $70,300 and began to phase out at $500,000 ($109,400 for married couples filing jointly and began to phase out at $1 million).
- The tax year 2019 maximum Earned Income Credit amount is $6,557 for taxpayers filing jointly who have three or more qualifying children, up from a total of $6,431 for tax year 2018. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
- For tax year 2019, the monthly limitation for the qualified transportation fringe benefit is $265, as is the monthly limitation for qualified parking, up from $260 for tax year 2018.
- For calendar year 2019, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is 0, per the Tax Cuts and Jobs act; for 2018 the amount was $695.
- For the taxable years beginning in 2019, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $2,700, up $50 from the limit for 2018.
- For tax year 2019, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,350, an increase of $50 from tax year 2018; but not more than $3,500, an increase of $50 from tax year 2018. For self-only coverage, the maximum out-of-pocket expense amount is $4,650, up $100 from 2018. For tax year 2019, participants with family coverage, the floor for the annual deductible is $4,650, up from $4,550 in 2018; however, the deductible cannot be more than $7,000, up $150 from the limit for tax year 2018. For family coverage, the out-of-pocket expense limit is $8,550 for tax year 2019, an increase of $150 from tax year 2018.
- For tax year 2019, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $116,000, up from $114,000 for tax year 2018.
- For tax year 2019, the foreign earned income exclusion is $105,900 up from $103,900 for tax year 2018.
- Estates of decedents who die during 2019 have a basic exclusion amount of $11,400,000, up from a total of $11,180,000 for estates of decedents who died in 2018.
- The annual exclusion for gifts is $15,000 for calendar year 2019, as it was for calendar year 2018.
- The maximum credit allowed for adoptions is the amount of qualified adoption expenses up to $14,080, up from $13,810 for 2018.