The new changes to federal income tax regulations are the most monolithic in over 30 years.
The Tax Cuts and Jobs Act passed at the end of 2017 by Congress, encompasses over 600 changes.
While tax season usually starts at the end of January, this year’s tax season has been heavily impacted by the recently ended government shutdown and the prospect of another such disruption looming on the immediate event horizon.
But the IRS has assured the public that tax returns may be filed as early as January 28, so ostensibly, it’s business as usual. But for taxpayers, there’s a learning curve involved. For these reasons, we suggest you get started as soon as possible.
Let’s examine some of the key tax changes to expect in 2019.
One 1040 for Everyone
This year, a key change is that taxpayers will all be using the same form to file. The old 1040, 1040A and 1040EZ are now rolled into one form.
But if you qualify for tax credits other than the Child Tax Credit, you may need to attach supplemental schedules.
Is Itemization Still a Thing?
This is a completely valid question, as the Standard Deduction has doubled and a lot of people are asking. But there’s no easy answer.
It’s a good idea to do things both ways. For example, if you’re planning on claiming the Standard Deduction, you’re well-advised to check your outcome with an itemized version first to see which offers you the greater benefit.
But this year, a sample under 10% will itemize, according to the Tax Policy Center. In previous years, this group would account for 30% of tax filers.
If you own your home, it’s a good idea to prepare filings using both itemization and the Standard Deduction. It’s important to note that there are new limits on what you can claim for income and property taxes.
Married couples over 65 can add to the Standard Deduction in the amount of $1,300 per person ($2,600 if both over 65). But if you’re a married couple which fits this description, both of you must choose the same option – itemization or Standard Deduction. Another good reason to run the numbers to see which is best for you.
This Is a big change for 2019, with the child tax credit doubling to $2K. Children under the age of 16 are eligible. It’s clear that this credit will be claimed by many more Americans this year, as the income ceiling has been raised to $400K from $200K, making many more Americans eligible to claim it.
The previous set up has been eliminated by the Tax Cuts and Jobs Act. Before this legislation, families could claim $4,050 for each household member in gross income deduction, so this child tax credit is a mitigating factor.
While, with 600 changes to the tax code there are many other factors involved, we hope this brief guide will encourage you to find out what the new tax normal means for your tax filing and how you can best take advantage. Contact us.