The IRS goes into the busiest week of the tax season. Millions of Americans are expected to file their income tax returns. While the changes in tax law are not as significant for this year as they were for tax year 2018, which followed the largest revision in generations, there are a few changes that people should be aware of. The following has changed for the 2019 tax year.
Standard print
After the standard withholding doubled in 2018, the number of taxpayers claiming it instead of breaking down their taxes rose sharply. This year, 90% of taxpayers are expected to claim the deduction.
The trigger was too increased this year keep up with inflation. Individuals will now receive a standard deduction of $ 12,200, and married people filing together will receive a standard deduction of $ 24,400. Individuals who qualify as Head of Household will receive a standard deduction of $ 18,350.
Some people may still want to decide whether to list or not. The decision depends on whether your deductible expenses are greater than the standard deduction. Tax preparation software or a tax professional can guide you through these with ease.
Health insurance
New this year: There is no longer a federal tax penalty for not having health insurance – something introduced by the Affordable Care Act. While “the mandate for insurance still exists in theory,” you won’t pay the government anything if you choose not to, Jonathan Medows, a Manhattan-based CPA, told CBS MoneyWatch.
However, taxpayers should be aware that four states along with Washington, DC retain their own penalty for lack of health insurance: California, Massachusetts, New Jersey, and Rhode Island.
Medical expenses
If you’ve had medical expenses equal to 7.5% or more of your income in the past and you have broken down your deductions, you could use that medical expenses to reduce your income and thereby pay less tax.
Last year, the minimum amount a person had to spend was reset to a higher amount, but Congress stepped in at the last minute to keep it at 7.5%.
“If you have an illness and you have unreimbursed medical expenses, you should be able to list more,” Medows said. “This should be beneficial for a lot of people.”
The divorce is now tax neutral
Anyone who gets divorced after 2018 and pays alimony can no longer deduct alimony payments. And ex-spouses who receive maintenance no longer have to claim this as income. Divorced before 2018? The old rules will continue to apply unless you update your decree to specifically state that the new rules will be taken into account.
Extender
Congress recently passed a bill that contains several tax “extenders” that are used to renew expired or expiring tax rules. Here are a handful that you might want to consider:
- People who have to pay for private mortgage insurance with their mortgage can withdraw it again. Kathy Pickering, chief tax officer at H&R Block, told The Associated Press that this would be a significant expense for some – in the $ 2,500 to $ 4,500 range.
- Another home-related extender: a $ 500 lifetime loan for certain energy efficient improvements to your home, such as: B. buying a high-performance oven. While many people have already taken advantage of this in the past few years, Pickering said newer homeowners may want to consider whether they can take advantage of it.
- People who suffered a foreclosure and canceled their debts got only some relief.
The IRS believes that canceled debts are considered income and therefore taxable. However, there has long been a provision that would waive it if the foreclosure was in a primary residence. That was not the case last year.
The waiver has now been reintroduced and retrospectively extended so that people who have had to pay tax on a canceled debt of this type can file an amendment. Pickering said this was a provision that affects few people but “has exceptional financial implications”.
Cryptocurrency
The IRS has tried to keep up with the popularity of cryptocurrency like Bitcoin. Currently, such digital currencies are generally considered property rather than currency. That means anyone who trades in it will have the same tax implications as if they were trading in stocks.
The IRS last year notify many taxpayers about the improper reporting of their Crypo transactions or even failure to report them. Therefore, the agency is stepping up its educational efforts and criminal investigations.
In addition, all taxpayers must answer a question about their involvement in virtual currency transactions. When they have received, sold, sent, exchanged or otherwise acquired a cryptocurrency, they will need to fill out a new form.
Tax experts say there could still be confusion, but suggest that anyone trading cryptocurrencies should keep a close eye on all of their own activities to ensure they are not stepping on the wrong side of the law.