Now that 2019 is off and running, it's time to start thinking about taxes. The tax reform bill, which was signed into law in December 2017, means changes for your taxes this year. Here are a few things to think about:
The marriage penalty is gone. The new law does away with the decidedly unromantic situation in which spouses were pushed into a higher tax bracket when they married. It’s all part of an overhaul in the tax bracket structure. If you’re single, you’ll probably see your tax bracket lowered, too.
Standard deduction. It’s the age-old question. Should you itemize or take the standard deduction? This year, thanks to the new tax laws, the answer to that question just got a lot easier. The standard deduction is now twice what it has been in previous years. For 2019, that means $12,200 for individuals, and $24,400 for married couples filing jointly. It means more people are going to be opting for the standard deduction, especially with the new limits on state, local or property tax deductions, capped at $10,000.
Child tax credit. Formerly, if parents made $110,000 filing jointly or $75,000 individually, they got a $1,000 child tax credit. Now, it’s doubled, and the income limits have gone through the roof, $400,000 filing jointly, $200,000 filing individually. More changes about your kids: If you’ve been contributing to a 529 savings plan for junior’s college expenses, now you can use it for education other than college.
Lifetime estate and gift tax exemption. This is a long-debated point among people who are doing their estate planning. Now, during a single calendar year, you can give someone $15,000 without incurring a gift tax. What if you want to give more? The new laws allow you to invoke the lifetime estate and gift tax exemption. The new tax laws double the amount you can give without incurring a gift tax. Now it’s $11.4 million for singles and $22.8 million for married couples filing jointly.
Charitable contributions. Do you contribute to your favorite charities if you’re no longer going to be itemizing — hence no deduction? That’s one question people are grappling with right now. An answer to that is, double up (or more) on contributions during a single calendar year, especially if you’re on the fence between itemizing or not. During that year, itemize rather than take the standard deduction and you could see tax savings as a result.
Mortgage deductions. This is one of the only things that dropped with the new laws. Before, you could deduct mortgage interest if your house’s value was $1 million or under. Now, it’s dropped to $750,000. But existing homeowners will be grandfathered in.
These are just a few of the changes that will impact your taxes this year and going forward. Check with your financial advisor or give Harbor West a call to make sure you’re taking advantage of the new laws.
This information is provided for general purposes and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the information, please consult your Financial Advisor for individual financial advice based on your personal circumstances.