Recent circumstances have prompted the extension of this year’s federal tax filing deadline from April 15, 2020 to July 15, 2020.
This provides some extra time not only to file your federal return, but to better understand any recent tax law changes affecting your 2019 taxes – including credits, deductions and tweaks to the tax bracket impacting your return and how much you’ll owe.
Read on to learn some of the biggest tax law changes that’ll likely shape your 2019 taxes and what your tax refund will look like beyond the new deadline.
First, did federal tax rates change in 2019?
While the Tax Cuts and Jobs Act (TCJA) did change income tax rates following its 2017 passage, the seven distinct tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) applying to 2018 and 2019 taxes remain the same. What is changing are the various income thresholds affecting each tax bracket, income ranges adjusted from the previous year to account for inflation.
Here are the new income thresholds for each 2019 tax rate (and filing status):
- 10% - $0-$9,700 (Single); $0-$19,400 (Married Filing Jointly); $0-$13,850 (Head of Household); $0-$9,700 (Married Filing Separately)
- 12% - $9,701-$39,475 (Single); $19,401-$78,950 (Married Filing Jointly); $13,851-$52,850 (Head of Household); $9,701-$39,475 (Married Filing Separately)
- 22% - $39,476-$84,200 (Single); $78,951-$168,400 (Married Filing Jointly); $52,851-$84,200 (Head of Household); $39,476-$84,200 (Married Filing Separately)
- 24% - $84,201-$160,725 (Single); $168,401-$321,450 (Married Filing Jointly); $84,201-$160,700 (Head of Household); $84,201-$160,725 (Married Filing Separately)
- 32% - $160,726-$204,100 (Single); $321,451-$408,200 (Married Filing Jointly); $160,701-$204,100 (Head of Household); $160,726-$204,100 (Married Filing Separately)
- 35% - $204,101-$510,300 (Single); $408,201-$612,350 (Married Filing Jointly); $204,101-$501,300 (Head of Household); $204,101-$306,175 (Married Filing Separately)
- 37% - $510,300+ (Single); $612,350+ (Married Filing Jointly); $510,300+ (Head of Household); $306,175 (Married Filing Separately)
Now that we’ve looked at the tax brackets for 2019, here’s how TCJA tax law changes are impacting several popular tax advantages:
The standard deduction is going up
Once it became law, TCJA nearly doubled the standard deduction, creating a much larger incentive for many to claim the deduction over itemizing on their returns. What had been a $6,350 deduction for Single filers and $12,700 for Married Filing Jointly taxpayers in 2017 became $12,000 and $24,000, respectively, in 2018, a significant tax law change affecting the majority of households across the country.
What’s more: the standard deduction is even bigger this year, with current amounts set at:
- $12,200 if you’re Single or Married Filing Separately
- $24,400 if you’re Married Filing Jointly
- $18,350 if you’re filing Head of Household
While these increases aren’t nearly as big as the jump from 2017 to 2018, they may help take a larger chunk out of your 2019 tax burden.
You can no longer claim the personal exemption
Another significant tax law change affecting your 2019 taxes is the elimination of personal and dependent exemptions, a once-valuable tax break for families and households around the U.S. What was once a $4,050 deduction for each member of your household (yourself, your spouse and each dependent) is now but a distant memory, more-or-less replaced by the bigger standard deduction and other changes resulting from the TCJA.
While this isn’t any different than 2018, eliminating the personal exemption remains a significant tax change with potentially considerable impact on your family’s 2019 return.
The Child Tax Credit has increased
Not only did TCJA double the Child Tax Credit (CTC) from $1,000 per child to $2,000, it also increased the amount that is refundable, providing families with children the opportunity to turn even more of the popular tax break into a larger tax refund. This means that up to $1,400 of each Additional Child Tax Credit you claim (up from $1,100) may now be applied to your refund check, potentially putting even more of your hard-earned money back in your pocket.
Additionally, the income thresholds to qualify for the full CTC have gone up, making the credit available to more U.S. households than ever:
- Single, Head of Household and Married Filing Separately taxpayers making up to $200,000 AGI (Adjusted Gross Income) may now qualify for the full Credit, which phases out completely at $240,000 AGI.
- Married Filing Jointly filers earning up to $400,000 AGI may claim the full CTC, which disappears at $440,000 AGI.
You may now also claim a nonrefundable credit of up to $500 for dependents other than your children. Learn what qualifies you for the Other Dependent Credit (ODC) here.
ACA penalties are gone
Beginning in the 2019 tax year, the ACA (Affordable Care Act) mandate penalizing individual taxpayers for not having health insurance is gone. Passage of TCJA eliminated the so-called “shared responsibility payment” tied to the healthcare law, meaning you’ll no longer face a penalty for being uninsured when it comes time to file.
Note: the ACA penalty was repealed only for tax years 2019 and later – and is not retroactive. So, if you weren’t covered by a qualifying health plan in 2018 or earlier, amending a previous year’s return to recoup that fee will likely not be successful.
No more alimony deduction
One of the 2019 tax law changes that may have largely gone unnoticed is the end of the alimony deduction. For better or worse, this makes any alimony payments resulting from a divorce or separation finalized after December 31, 2018, nondeductible. It also eliminates the opportunity for recipients to count those payments as taxable income.
Alimony payments made from previous year divorces (2018 or earlier), however, are still deductible and can be claimed on Form 1040, Schedule 1.
Lower limits on state & local tax deductions
In the past, all state and local income, property and sales taxes you’ve paid have usually been tax deductible. TCJA, however, has capped that amount, limiting the total state and local taxes you can deduct on your federal return to $10,000.
Additionally, you may now only deduct mortgage interest on up to $750,000 of qualified mortgage debt, down from the $1 million limit in place prior to the bill.
Need help sorting through 2019 tax law changes?
At Liberty Tax®, our goal is to help you understand the tax law changes affecting your 2019 return, ensuring you have everything you need to minimize your tax bill and maximize your federal refund.
You do life. We do taxes. Visit your local Liberty Tax® pro today to learn more.