03 Jan Tax Reform and Changes That Affect 2019 Taxes
Most changes under tax reform were implemented for 2018 taxes, but watch for these tweaks.
The Tax Cuts and Jobs Act, which was passed in late 2017, created massive changes, starting for filers of 2018 tax returns. And while the bulk of the tax reform has already been rolled out, keep an eye out for these tweaks and delayed changes impacting 2019 taxes, which are filed by April 2020, for the first time.
Here are tax changes to watch out for when filing 2019 taxes.
No Alimony Deduction for New Divorces
A change impacting 2019 taxes for the first time under tax reform relates to the alimony deduction. For divorces and separation agreements finalized after 2018, alimony payments are not deductible for the payer or counted as taxable income to the recipient.
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Divorces finalized in previous years are grandfathered into the old system in which alimony was deductible. So if you are deducting alimony from an older divorce decree, you can still take that tax break. Remember that you don’t have to itemize on your tax return to claim alimony payment deductions. These are claimed on your Form 1040, Schedule 1 as above-the-line deductions.
No Individual Mandate Penalty
Under President Donald Trump’s tax reform, the “shared responsibility payment,” or penalty associated with not having individual health insurance, is reduced to zero beginning after Dec. 31, 2018.
Previously, filers who could afford health insurance but chose not to buy it were charged a fee under the Affordable Care Act. Starting with the 2019 plan year, for which you file taxes in 2020, this penalty is no longer enforced. “You need not make a shared responsibility payment or file Form 8965, Health Coverage Exemptions, with your tax return if you don’t have a minimum essential coverage for part or all of 2019,” according to the IRS.
While taxpayers won’t have to worry about the fee, “they have to worry if they get sick and don’t have insurance,” says Harlan Levinson, a certified public accountant based in Beverly Hills, California.
Keep in mind, too, that some states have their own requirements for holding individual health insurance. So while you may escape this at a federal level, check your state, which may charge its own penalty for not carrying sufficient insurance.
The Standard Inflationary Changes
While this doesn’t related to tax reform of the Affordable Care Act, remember that certain tax figures, cutoffs and thresholds typically increase each year. Those include the standard deduction and the income cutoffs determining your tax brackets.
The standard deduction amount for 2019 increased to:
- Single or married filing separately: $12,200.
- Married filing jointly or qualified widow(er): $24,400.
- Head of household: $18,350.
[Read: How to File Back Taxes. ]
The income cutoffs for 2019 tax brackets, which impacts taxes filed in 2020, have also increased this year. They are:
| Rate | Single | Married Filing Jointly | Head of Household |
| 10% | $0 – $9,700 | $0 – $19,400 | $0 – $13,850 |
| 12% | $9,700 – $39,475 | $19,400 – $78,950 | $13,850 – $52,850 |
| 22% | $39,475 – $84,200 | $78,950 – $168,400 | $52,850 – $84,200 |
| 24% | $84,200 – $160,725 | $168,400 – $321,450 | $84,200 – $160,700 |
| 32% | $160,725 – $204,100 | $321,450 – $408,200 | $160,700 – $204,100 |
| 35% | $204,100 – $510,300 | $408,200 – $612,350 | $204,100 – $510,300 |
| 37% | More than $510,300 | More than $612,350 | More than $510,300 |
Bottom line: While many of the growing pains and learning curves associated with implementing tax reform took place for 2018 taxes, keep these tweaks in mind for 2019.