Tax Tips‎ > ‎

Personal Tax Tips

CLICK HERE TO VIEW MY BLOG FOR NEWS/TIPS ABOUT THE NEW TAX LAWS EFFECTIVE FOR THIS 2019 TAX YEAR.  


MAJOR CHANGES FOR 2019 RETURNS 

 Here are some basics:.

  • Standard Deductions are increased for 2019:
    • $12,400 (singles) (married filing separately)
    • $24,800 (married filing joint)
    • $18,650 (head of household)

     Earned Income and AGI Limits (Slight increases from 2018)

      Earned income and adjusted gross income (AGI) must each be less than:

If filing...Qualifying Children Claimed
ZeroOneTwoThree or more
Single, Head of Household or Widowed$15,820$41,756$47,440$50,594
Married Filing Jointly    $21,710    $47,646$53,330$56,844

   

  Note:  Investment income must be $3,600 or less for the year.


  Maximum Credit Amounts for Tax Year 2019 is:    

  • $6,660 with three or more qualifying children
  • $5,920 with two qualifying children
  • $3,584with one qualifying child
  • $538 with no qualifying children

 For more information on whether a child qualifies you for EIC, see:



  No new Changes in Child Tax Credit for 2019

In 2018, the credit was available to far more households, thanks to a massive raise in the phaseout thresholds. Here's a quick guide to the Child Tax Credit phaseout thresholds for 2019 (same numbers as 2018).  AGI means Adjusted Gross Income (basically your total income). In previous tax years, the credit has only been available for low- to middle-income households. For instance, the credit began to disappear in 2017 for married couples who earned more than $110,000 and for single filers with AGI above $75,000.

Tax Filing Status

Maximum AGI for Full Credit

AGI Where Credit Disappears

Single

$200,000

Over $240,000

Married filing jointly

$400,000

Over $440,000

Head of household

$200,000

Over $240,000

Married filing separately

$200,000

Over $240,000

DATA SOURCE: GOP TAX REFORM BILL.


Federal long-term capital gains slightly better than 2018.
The chart below may help you if you are concerned about long term capital gains (investments held over 1 year).

The long-term capital gains rate is now based on your maximum taxable income levels. These levels are increased slightly from 2018.  For married filing joint taxpayers:

Income

Long-Term Capital Gains Rate

up to $80,000

0%

$80,000-496,600

15%

Over $496,600


20%

Source:Dan Caplinger (Motley Fool) https://www.fool.com/taxes/2019/12/22/4--4 key changes for your 2020 tax return


Please note the following:

First, if your long-term capital gains take you into a higher tax bracket, only the gains above that threshold will be taxed at the higher rate. In other words, if your long-term capital gains bring your taxable income $1 over the level for the 0% bracket, only $1 will be taxed at 15%, and the rest of your long-term capital gains will be taxed at 0%.

Second, for single taxpayers who make more than $200,000 per year and married taxpayers who file jointly and earn more than $250,000, there is an additional 3.8% tax on investment income, including capital gains, above a certain level because of the net investment income tax.


DELINQUENT TAXPAYERS--THE IRS IS GETTING SERIOUS ABOUT YOU!!

According to an article by Michael Cohn in Accounting Today News, there has been a bill passed in Congress and signed by Obama in December 2015  that will allow the State Department to revoke the passports of long-term tax delinquents who owe the IRS over $50,000 in tax debts.  I know to most of us $50K is a lot of money, but this amount could be an accumulation of several years, so it really would not take many years to owe this kind of money.  Okay, you say," no problem, I don't travel overseas", BUT there is another sneaky provision...they are gonna hire PRIVATE TAX COLLECTORS!!  Be sure your tax returns are current--of course MTL is ready and able to help you do just that. 
 
Note: Please be aware that criminals are posing as IRS agents trying to get you to pay PHONY tax debts.  DO NOT answer any questions to someone calling you.  The IRS ALWAYS writes, they do not call or email.  

However, now that this law has passed, I'm not sure what the protocol for the tax collectors will be.  IF YOU OWE THE IRS BACK TAXES OR HAVE NOT FILED, CONTACT ME SO WE CAN GET THIS TAKEN CARE OF!!!

I can give you a copy of this entire article if you wish, or you can download it at http://www.accountingtoday.com/news/tax-practice/highway-bill-revoke-passports-tax-delinquents-private-debt-collectors-76612-1.html.  Be sure to note the "continue to site" click on top right of page so that you don't buy or get signed up for something you may not want.  Yes, they are calling this a HIGHWAY BILL!!!  

No more health coverage penalty!

The Obamacare health insurance penalties for folks who did not have health insurance is OVER!  However, if you are being supplemented for your health care insurance through the Marketplace, there is still a penalty if your income is higher than you originally reported to them.

Alimony is now NOT deductible for payers, and NOT taxable to recipients, if your divorce ended after December 31, 2018.

 If your divorce ended before Dec 31, 2018, then the old rules generally apply unless modifications were made.

Backdoor Roth IRA (for marrieds making more than $184K or singles over $117K)

This tip came from a savvy client. Normally the income of marrieds making approximately $196,000 ($124,000 if single) does not allow them to make a full Roth contribution.  A Roth IRA is desirable for those making money in taxable accounts (interest, dividends).  If the money is instead in a Roth IRA, the interest, dividends, and proceeds of any sales of the asset are not taxable.  For those of you that make over the above amounts and would like to make a ROTH contribution if you could, I highly suggest that you read the article written by Harry Sit at http://thefinancebuff.com/the-backdoor-roth-ira-a-complete-how-to.html.  

Other Miscellaneous Information:

Social Security wage base for 2019 is $132,900. Under age 66, the amount you can make is $17,640 in 2019 before you start to lose a portion of your social security benefits. However, if you are over age 66, you can earn any amount of money and still draw your full social security benefits.  


Comments