Tax Planning Post Tax Reform: A Year Removed

Tax Planning Post Tax Reform: A Year Removed

It’s been said that “tax issues never take a day off.” While that is true, it’s also true that most small business owners are too busy to worry about tax issues except in April and December.  Don’t look now, it’s almost December. This issue will review where we stand on 2019 tax amounts.

More Tax Cuts After Tax Reform?

Not in 2019. Absent the issues before Congress at this present time, we would be talking about shoring up some of the items left undone under Tax Reform such as expired tax breaks and real property improvement expensing. The Administration has talked openly about the desire for further tweaking of the tax code to provide additional middle class tax relief, the Democrats are on record to roll back portions of the “reform.” Given the contention in Congress at present, don’t look for any significant tax legislation until next year.

Speaking of tax reform, we are close to completing the second full year under the new tax code, but we still receive a ton of questions.

Which Tax Items Are No Longer Around?

The personal exemption, Alternative Minimum Tax, state and local tax payments over $10,000, and miscellaneous itemized deductions are all still gone.  Also, there is no phase-out of itemized deductions for high-earners.

Is Congress Going To Fix The SALT Deduction Limitation?

SALT is short for state and local tax, and no, the $10,000 maximum cap is still in place in 2019. This is one of the issues that was high on politicians list who are from high-tax states, but most certainly will not be addressed in the short term.

2020 Social Security wage base increases:

Next year’s social security wage base (@6.2%) increases from $132,900 to $137,700, which amounts to an additional $298 in tax. Double this amount for those who are self-employed. 

Reminder On 2019 Tax Amounts: The IRS recently issued its annual inflation adjustment to next year’s tax deductions and schedules which reminds us, to remind you, about the 2019 figures:

• The 401(k) maximum goes to $19,000 and the “catch-up” limit to $6,000 for those 50 and over.
• The standard deduction is $24,400 and $12,200.  Head of  household gets $18,350.
• The alternative minimum tax income exemption goes to $111,700 and $71,700.
• Medical expenses deductible after 10% of AGI (was 7.5% in 2018).
• The student loan interest deduction  is $2,500.
• The adoption credit is $13,810. 

Big Reminder On Home Mortgage Interest:

We have had numerous comments on this one after the 2018 filing season.  Home mortgage interest can only be deducted if used to buy, build or improve your home. It is not deductible if used for credit card payoffs, personal purchases, etc. This applies regardless of when the loan was made and without regard to it’s deduction prior to 2018.

2019 Individual Tax Rates:

The lower tax rates and longer tax brackets are still around and all were adjusted for inflation. The following are the rates applied to taxable income:

Singles

Tax Inc.

Marrieds

Tax Inc.

10%  - up to $9,700

to $19,400

12%  - next $29,775

($39,475)

next $59,550

($78,950)

22%  - next $44,725

($84,200)

next $89,450

($168,400)

24%  - next $76,525

($160,725)

next $153,050

($321,450)

32%  - next $43,275

($204,000)

next $86,750

($408,200)

35%  - next $306,300

($510,300)

next $204,150

($612,350)

37%  - over $510,300

over $612,350