Tax Season is Upon Us, Don’t Fret – You’ve Got This!

It’s that time of year again…as the end of January rolls around it seems all of us are striving to maintain our New Year’s Resolutions, keep up with Houston’s swing in temperatures without getting sick, and begin to dreadfully think about tax filing preparation.

We thought it would be helpful to provide key information and a summary of 2019 tax law changes to be aware of as you begin to prepare and gather information to file your 2019 tax return.

Tax Season

First off, standard deductions have increased across the board for the 2019 tax reporting year. However, these changes vary based on whether you are filing as a single person vs. a married couple filing jointly. Deductions for single taxpayers increase from $12,000 in 2018 to $12,200 for 2019 while married couples filing jointly jump from $24,000 in 2018 to $24,400 for 2019. And lastly, Head of Household standard deductions have increased from $18,000 in 2018 to $18,350 for 2019.

Other increases include contributions to SEP IRAs and Traditional IRAs. SEP IRA contributions have increased from $55,000 in 2018 to $56,000 for 2019, while Traditional IRA contributions have increased from $5,500 in 2018 to $6,000 for 2019. There is an important distinction to note regarding the time frame for these contributions. SEP IRA contributions can be made up to the date of filing your 2019 return this year, while Traditional IRA contributions have to be made by April 15th of this year.  If you are over 50, you’re allowed an additional $1,000 catch-up contribution to a Traditional IRA.

In addition to these changes, taxpayers without health insurance coverage will no longer be subject to the federal individual mandate penalty. Under the Affordable Care Act, Americans without health insurance faced a potential tax penalty of up to 2.5% of a household’s taxable income, however that penalty was eliminated at the end of 2018.

Lastly, for those who are trustees of a complex trust, it’s not too late to plan for 2019. Under the 65-day rule, a trust may elect to treat distributions to beneficiaries made by March 5, 2020 as if the distributions were made in 2019.  This can provide significant tax savings, since trusts are subject to the top tax rate of 37% rate when income exceeds only $12,750.

We hope this information is helpful to you. As the 2019 tax reporting year fast approaches, stay tuned for our “That Time of Year” blog series where we will examine important tax considerations, share useful tax tips, and keep you up to date on important deadlines for tax filing season!

If you are in need of tax guidance or support, please reach out to us at Maddox Thomson & Associates. We are always happy to help.

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