Your 2019 Tax Return: What’s New This Year?
Tax Day will be here sooner than you think. This year, your tax return can be a lot different due to the tax changes for 2019. And don't you want to know what to expect from your tax refund sooner rather than later? Tax laws are put in place not only for your refund but to lower what you pay and to make filing much easier for you. But that's not the case for every person.
Continue reading to learn what you need to know, no matter what kind of taxpayer you identify as.
If You Are Middle Class
Many of us would like a good tax cut. The latest tax reform news reveals that the law wants to deliver that in a few different ways. One is the lower rates for several middle-class tax brackets. For example, those who earn up to $82,500 in taxable income will need to pay a top rate of 22%. This is compared to the 25% rate from older tax laws.
Even bigger tax changes show the dramatic increase in the amount of money taxpayers who don't itemize their returns can be excluded from their taxable income altogether. This sum, or the standard deduction, nearly doubles to $24,000 from $13,000 for couples. This amount drops to $12,000 from $6,500 for singles. This change could mean that most middle-class taxpayers can avoid owing any income tax on the additional money they earn.
What You Can Save
- Lower rates that translate into a tax cut
- Those earning $49,000 to $86,000 pay an average $930 less
- Additional tax cuts under the Tax Cuts and Jobs Act
If You Have Children
The standard deduction is a part of some of the tax changes for 2019 and is a big deal for taxpayers. To make this possible, policymakers had to reconfigure many other parts of the tax code, including those that have long benefited parents. This results in complicated tradeoffs that should leave most families better off. To balance the cost of expanding the standard deduction, Congress made some major changes.
The longtime perk of $4,050 personal exemption that taxpayers could once claim was eliminated. Since taxpayers could claim an exemption for every child, by getting rid of the provision, the tax code benefits shifted away from parents. To fix this, Congress added another perk targeted for families. This perk doubled the value of the Child Tax Credit from $1,000 to $2,000.
It also raises the income threshold dramatically from $110,000 to $400,000. These tax changes will benefit families on different ends of the income spectrum. Married couples with children who earn $80,000 without itemizing could end up owing about $2,240 less this year than years prior. The more children they have, the more their tax savings could increase.
What You Can Save
- $500 non-refundable tax credit for all dependents who aren't eligible for the Child Tax Credit
- $1,400 refundable tax credit based on the new Child Tax Credit
If You Are Retired
The latest on tax reform shows that the Tax Cuts and Jobs Act doesn't focus on retirees. Therefore, if you are retired, you shouldn't expect any change to the taxation of your Social Security benefits. However, some of the law's provisions still affect older adults. One of the largest deductions comes from your healthcare.
In 2015, nearly 9 million Americans deducted medical expenses. Nearly three-quarters of those individuals were older than 50. This has all been reported by the AARP Public Policy Institute. Back in 2018, tax lowered the threshold for writing off medical expenses from 10% to 7.5% of your adjusted gross income. Unfortunately, that rate has expired. For the new tax laws 2019, it's gone back up to 10% for taxpayers of any age to write off approved medical expenses.
You shouldn't assume that you won't be able to claim this deduction, however. Ensure that you're familiar with all the services and procedures that can qualify for medical write-offs. If you need help finding them, check the IRS Publication 502. If you bunch up your costs, such as for a wheelchair pump, you can at least take the deduction 12 months.
This is assuming you haven't incurred high enough medical expenses within that year to write off. For example, scheduling a qualifying elective surgery, purchasing new hearing aids, and home improvements are all costs you can group together.
If You Work For Yourself
One of the biggest tax changes for 2019 was shifting focus to freelancers and small-business owners. The government always wants to boost the economy and entrepreneurs are some of the law's biggest winners in 2019. They can receive a 20% deduction qualified business income for anyone who is the owner, partner, or sole proprietor of an LLC.
This deduction is available for workers who also receive the standard deduction. This means that a single freelancer without kids making $50,000 can save about $1,750. That's almost $700 more than for a similar wage worker. The more wealthy the taxpayer, like business owners, could save tens of thousands.
Find A 1099
If you only receive a W-2, the deduction for eligible income likely won't apply to you. However, if you get one or more 1099 tax forms, like if you are an Uber driver, you could be eligible. You should check with a tax professional first to check your eligibility. If you are a hobbyist, then you cannot claim the deduction.
The IRS classifies a hobby from a business using nine factors, such as intent for profitability. A good rule of thumb is if it's something you've engaged in and earned money from over the years.
Most wealthy professionals face their own limitations. Businesspeople in fields with a "specific service," like lawyers and doctors, may not be eligible to claim a full deduction. People in those fields who earn a business income higher than $157,500 are subject to restrictions on how much of the deduction they can claim.
Understand The Tax Changes For 2019
If you're looking for tax experts you can trust, speak to a professional today! A missed deduction could cost you more than working with a professional would. The sooner you connect with someone who knows the tax changes for 2019, the sooner you can cross this off your to-do list. Give our W-2 form generator a try and calculate the numbers that you need to file your taxes stress-free!