Most years, slight changes are made to tax rates. These updates are generally minor and reflect changes in inflation. Major tax code revisions, like those that went into place for 2018 under the new tax law (TCJA), are rare.
For tax years 2019 and 2020, the IRS has made tweaks to roughly 60 tax provisions. Below are a few highlights that will affect the largest percentage of taxpayers. If you have specific questions related to your tax situation, be sure to consult with your tax professional.
New Tax Brackets:
1) Standard Deductions: For tax year 2019 (i.e. the returns you will file over the next few months), the standard deduction for single filers rises to $12,200. For married/joint filers, it will be $24,400. For tax year 2020, the amounts will increase again to $12,400 and $24,800 respectively. For heads of households, the standard deduction increases from $18,000 in 2018 to $18,350 (2019) and $18,650 (2020). Remember, you take whichever is higher when comparing the standard deduction to your itemized deductions.
2) Earned Income Credit (EIC):
2019 (investment income must be $3600 or less for the year)
2020 (investment income must be $3650 or less for the year)
3) Adoption Credit: Taxpayers can receive a credit of up to $14,080 for qualified adoption expenses of a special needs child paid in 2019. For tax year 2020, the credit increases to $14,300.
4) Healthcare coverage: The penalty for not having the minimum healthcare coverage was $695 on your 2018 return. For 2019 and beyond, there is $0 penalty.
5) SALT Cap: For the time being, the cap on the deductible portion of State and Local Tax (SALT) will remain unchanged at $10,000 annually. Repealing the $10,000 cap has been discussed in the House so changes may be coming down the line.
Questions about changes to these or other tax provisions? Get in touch with Levesque & Associates!