2018 was tough for taxpayers as new Tax Cuts & Jobs Act took effect that dramatically changed how people had to file their tax returns. The old 1040A and 1040EZ forms went away and everyone was required to use the same main 1040 form.
Even though there was no major changes of the 2019 tax return, you can still expect to see some big changes and how they could affect you.
Form 1040: Revised and Redesigned
For 2018 tax returns, taxpayers had six (6) new supplemental schedules that would build on the Form 1040. For 2019 tax returns, those schedules have been redesigned and merged into three (3) schedules that will hopefully streamline the filing process. The three (3) new schedules combine some of the prior year schedules into larger forms.
Schedule 6 is now part of Form 1040. Schedules 2 and 4 have been combined into a single schedule as have Schedules 3 and 5. Schedule 1 remains as is. Another notable change is that the signature line is once again, at the end of the form. While the new Form 1040 for 2019 is no longer “postcard size,” it is still shorter than it was in 2018.
Form 1040SR: U.S. Tax Return for Seniors
New for 2019, seniors (aged 65 and older) will have their own tax return option. The new form is a simplified version of the much larger, more complex Form 1040. It has a larger font size and better color contrast making it easier to read. The form allows seniors to claim the standard deduction or itemize their deductions on Schedule A. There are also no income limits or restrictions on types of income reported like on the prior Form 1040EZ, so more seniors will qualify to file the 1040-SR.
Increased Standard Deduction
For the 2020 tax season, the standard deduction amounts will be increased slightly as in previous years. The new amounts for 2019 tax returns are below. The increased standard deduction will continue to allow more individuals to file without itemizing deductions on Schedule A.
|FILING STATUS||STANDARD DEDUCTION AMOUNT|
|Single & Married Filing Separate (MFS)||$12,200|
|Head of Household||$18,350|
|Married Filing Joint (MFJ)||$24,400|
Alimony is No Longer Deductible
Starting Jan. 1, 2019, alimony is no longer deductible to the payer and is no longer taxable to the payee for separation or divorce agreements or decrees in effect on this date or later.
Health Insurance Mandate Penalty Eliminated
The penalty for failing to obtain health insurance expired at the end of 2018. As such, for 2019 tax returns there is no box on Form 1040 to check off indicating you had health insurance.
Some states have their own individual health insurance mandate requiring coverage. If you live in a state with a mandate and don’t have insurance (or an exemption) you must pay a fee when you file your state taxes. Currently, Massachusetts, New Jersey, and Washington, D.C. have such mandates (effective for 2019) in addition to Vermont whose mandate is effective starting in 2020.
Medical Expense Deduction Threshold Remains at 7.5 Percent
For tax years 2017 and 2018 the medical expense deduction threshold was rolled back to 7.5 percent of adjusted gross income (AGI). In 2019 it was scheduled to revert to 10 percent; however, the Further Consolidated Appropriations Act, 2020, extended the 7.5 percent threshold through 2020.
In 2019, the IRS still allows all taxpayers to deduct the total qualified unreimbursed medical care expenses for the year that exceeds 7.5% of their adjusted gross income. Beginning in 2020, the threshold amount increases to 10% of AGI.
IRA contribution limits
IRA contribution limits went up by $500 to $6,000 for 2019, allowing taxpayers to boost the amount of tax deductible contributions they can make to traditional IRAs. Those 50 or older get to add an extra $1,000 to their IRA contributions.
401k Contribution Limit
Maximum contributions to 401(k) accounts also went up by $500, reaching $19,000. Those 50 or older get to add an extra $6,000 to 401(k)s — with the 401(k) catch-up number up $500 from 2018’s $5,500 amount. Taking advantage of these high limits will decrease your taxable income.
Income Tax Brackets & Tax Rates
For 2019 tax returns, there are still seven (7) tax rates. They are: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
AMT Exemptions Increased
The Alternative Minimum Tax (AMT) exemption amounts have been increased for inflation for 2019, making fewer taxpayers subject to AMT.
HSA Contribution Limits
HSA account contribution limits have increased to $3,500 self-coverage only and $7,000 for family coverage.