2018 is coming to an end.
It seems like the year went by so quickly. Now, are you ready for the new tax season? The 2019 tax season brings in a variety of changes that will ultimately affect how you file and Form 1040.
Read below to find out what you need to know before filing your 2018 tax return.
Check your withholding
Due to the Tax Cuts and Jobs Act (TCJA), taxpayers may receive a lesser refund or a tax bill because of their decreased withholding. We advise that you should definitely check your withholding if you have a two-income family, work multiple jobs or part of the year, have children to claim the Child Tax Credit or older dependents, you itemize your deductions on prior year returns, receive high tax refunds or tax bills for the prior year or high-income taxpayers in general. Be advised that if you don’t have enough income tax withheld from your employer, you can be subject to a high tax due at the end of the year.
If you did not fill out an updated W-4 for 2018, click here to find out if you should adjust your withholding with the IRS Withholding Calculator.
The standard deduction increases
The TCJA doubles all filing status’ standard deduction. Below you will find out how next year will be different.
| Filing Status | 2017 Tax Year Standard Deduction | 2018 Tax Year Standard Deduction |
|---|---|---|
| Single | $6,350 | $12,000 |
| Married Filing Jointly | $12,700 | $24,000 |
| Married Filing Separately | $6,350 | $12,000 |
| Head of Household | $9,350 | $18,000 |
Looking at the standard deduction, you can figure that in order to itemize your deductions, you will need to exceed the standard deduction, which may be difficult. Spouses who file married filing separately should be attentive towards these changes since one spouse has to itemize their tax return.
Find your tax bracket
The federal income tax brackets for 2018 are 10%, 12%, 22%, 24%, 32%, 35% and 37% in comparison to 10%, 15%, 25%, 28%, 33%, 35% and 39.6% for 2017.
- 10%
less than $9,525 for individuals; $19,050 for married filing jointly; and $13,600 for head of household) - 12%
more than $9,525 to $38,700; $19,050 to $77,400 for couples; and $13,600 to $51,800 for head of household - 22%
more than $38,700 to $82,500; $77,400 to $165,000 for couples; and $51,800 to $82,500 for head of household - 24%
more than $82,500 to $157,500; $165,000 to $315,000 for couples; and $82,500 to $157,500 for head of household - 32%
more than $157,500 to $200,000; $315,000 to $400,000 for couples; and $157,500 to $200,000 for head of household - 35%
more than $200,000 to $500,000; $400,000 to $600,000 for couples; and $200,000 to $500,000 for head of household - 37%
more than $500,000; more than $600,000 for couples; and more than $500,000 for head of household
Itemized deductions are limited or eliminated
For taxpayers who itemize each tax year, they’ll be faced with many changes. Take a look at the following:
- No limit of adjusted gross income (AGI) for high-income individuals
- Unreimbursed medical expenses must exceed 7.5% of your AGI for deduction (For the tax year 2019, it increases to 10%)
- $10,000 limitation for State and Local Taxes (SALT) deduction ($5,000 for married filing separate)
- Job-related or miscellaneous itemized expenses that exceed 2% of your AGI is no longer deductible
- Unreimbursed W-2 job expenses are limited to fee basis government officials, members of the military, qualified performing artists, or employees with impairment-related work expenses
- Alimony payments and reporting alimony as taxable income are no longer deductible for divorces or separation agreements after Dec. 31, 2018
- 60% limitation of AGI for charitable contributions deduction
- Deductions for college athletic event seating rights or seat licenses are no longer allowed
- You can deduct interest on your mortgage or home equity loan that takes place before Dec. 15, 2017 for up to $1,000,000 ($500,000 if you are married filing separate)
- After Dec. 15, 2017, deduct your interest for up to $750,000 ($375,000 for married filing separate)
- Casualty and theft losses are only deductible for federally declared disasters; which a FEMA code for the disaster is a requirement (Losses must exceed $100 per casualty and the net total loss must exceed 10 percent of your AGI)
- Moving expenses disappear except for members of the U.S. Armed Forces
Dependent benefits change
The TCJA eliminates the personal exemption for your dependents as well as yourself and your spouse. However, the Child Tax Credit’s (CTC) maximum credit increased to $2,000 and $1,400 of it can be refundable per qualifying child as the Additional Child Tax Credit (ACTC). Additionally, the credit phases out at $200,000 or $400,000 for married filing jointly taxpayers.
IMPORTANT: Your qualifying dependents must have Social Security Numbers in order to claim the CTC/ACTC.
*A new credit is introduced for qualifying dependents who cannot be claimed for the CTC. Taxpayers can receive a credit of $500 per dependent. Qualifying dependents must either be a U.S. citizen, U.S. national or has U.S. permanent residence. For example, you can claim children over age 17, college students, children are ITIN holders or relatives in your household.
Alternative minimum tax (AMT) increases
In order to be exempt from the AMT, you must have an income of $70,300 for individual filers, $109,400 for married filing jointly/qualifying widow, and $54,700 for married filing separately. The phase-out amount increases to $500,000 or $1 million for joint filers. For more information from the IRS, click here.
Revised combat zone tax benefits
Members of the military in the U.S. Army, U.S. Navy, U.S. Marines, U.S. Air Force, and U.S. Coast Guard who serviced in the Sinai Peninsula can claim the combat zone tax benefits retroactive to June 2015.
Having Health Care Coverage
Unfortunately, you can’t get away with not having health insurance. You will be subject to penalties if you do not report full-year coverage, an exemption from coverage, or report the individual shared responsibility payment for 2018. In contrast to the 2018 tax year, you will not face penalties for not having health insurance for the 2019 tax year.
Renew your Individual Taxpayer Identification Number (ITIN)
As a reminder, taxpayers whose middle digits are in between 73 to 77, 81, or 82, they will need to renew their ITIN since it expires on December 31, 2018. If it has already expired on 12/31/2016 (78 or 79) or 12/31/2017 (70, 71, 72, 80), you can still renew it. All you need to do is send a new W-7 along with valid ID’s to the IRS. For more information, click here.
You can’t run away from tax reform
We’re here to make this process easy for you. Keep your eye out for when you can start your 2018 tax return in January with us! If you haven’t filed your prior year 2017 taxes yet, file now and take advantage of your deductions!
Tags: ACTC, child and dependent care tax credit, claiming dependent, combat zone tax benefits, CTC, health care coverage, individual shared responsibility, itemized deduction, ITIN, qualifying dependent, standard deduction, tax cuts and jobs act, tcja
