1. In regard to retirement plans, the maximum contribution limits
for 2019 are outlined below:
|
Traditional & Roth IRA's for Taxpayers under 50 | $
6,000 |
|
Traditional & Roth IRA's for Taxpayers over 50 | $ 7,000 |
| 401K's
for Taxpayers under 50 | $19,000 |
| 401K's
for Taxpayers over 50 | $25,000 |
| SEP
& Defined Contribution Plans for Taxpayers under 50 | $56,000 |
| SEP
& Defined Contribution Plans for Taxpayers over 50 | $56,000 |
2. For 2019 the IRS allows a deduction for your automobile at various rates depending on the
usage. The details are outlined below:
| Car
used for business | 58 cents per mile |
|
Car used for charitable purposes | 14 cents per mile |
|
Car used for medical or moving purposes | 20 cents per mile |
3. Child care tax credits for summer day camp and babysitters are still available for children under 13 years
of age if both parents work.
4. In regard to the "kiddie" tax the law increases the age
from 14 to 18 regarding investment income. If the child is under 25 and still in college and they have investment
income of over $2,100 they will be taxed at their parents' rate instead of the individual rate.
5. The
minimum corporate tax in New Jersey is now based on gross receipts and ranges from $500 to $2,000 for 2019.
6. The New Jersey Homestead rebates for a homeowner now range from $1,000 to $2,000 for 2019.
7. The threshold for the deduction of unreimbursed medical expenses has been changed to 7.5%
of your adjusted gross income.
8. The tax rate on dividend income is generally 15% for 2019.
However, if in the top tax bracket then the rate is 20%.
9. The maximum tax rate on capital
gains is 15% for 2019 if your taxable income is under $470,700 on a joint return. If over $470,700, the capital gain
rate rises to 20%.
10. A Medicare surtax of 0.9% will be assessed on W-2 employee
compensation or self-employment income if you earn over $250,000 on a joint return.
11. There
is a 3.8% Medicare surtax on net investment income if your modified adjusted gross income is over $250,000 on a joint
return. Net investment income includes, interest, dividends, capital gains, annuities, royalties and passive rental
income. It does not include tax-free interest or distributions from retirement plans and IRA's.
12.
For flexible spending accounts (FSA) over the counter medications are no longer eligible. In 2019, the maximum annual
FSA contribution for each employee will be capped at $2,700.
13. Under the American Opportunity Tax Credit
there is a $2,500 maximum credit for qualified higher education expenses such as college. However the credit phases out for
married couples earning over $160,000.
14. In 2019, there are no estate taxes at the federal
level unless your estate is over $5,700,000. In New York the estate must be over $5,740,000 in order to be
taxed. The annual gift tax exclusion is $15,000 per donee in 2019.
In 2019, the estate tax was eliminated in New Jersey. However, the New Jersey Inheritance tax will remain in effect
with no change during the same time period. This is a tax assessed on transfers to beneficiaries other than spouses,
parents, or children. Therefore, it would be imposed on nieces, nephews, siblings and friends. The New Jersey
Inheritance tax rates range from 11% to 16% based on taxable income.
15. If your adjusted
gross income is over $313,800 on a joint return, your itemized deductions are reduced by 3%.
16.
The Social Security wage base has increased to $132,900 for 2019. If you start collecting Social Security
at age 62, you will be subject to a 25% discount. If you are between the age of 62-66, you can earn up to $17,040
before losing any benefits. There is no income restriction of social security benefits after age 66.
17.
In 2019, contributions to HSA Plans are deductible up to $7,000 for family coverage. If over 55, you can deduct an additional
$1,000.
18. There will be an increase in the New Jersey Gross Income Tax exclusion for pension
and retirement income over the next 4 years up to $100,000 on a joint return.
19. The
New Jersey sales tax was reduced from 7% to 6.625% starting on January 1, 2018.
Tax Cuts & Jobs Act - 2017
The new tax law called
"Tax Cuts & Jobs Act" was recently passed by Congress at the end of 2017. This new law creates numerous tax
saving opportunities for individuals and businesses. Some of the new laws are simple and others are very complex. I have
outlined below the highlights of this recently passed tax legislation.
Individuals
1. The new law provides for the same number of tax brackets but with lower rates. The highest tax rate
has been reduced from 39.6% to 37%.
2. The personal and dependent exemptions which were $4,050 each
have been eliminated.
3. The child tax credit for those under 17 has been increased from $1,000 to
$2,000 per child. The income level at which the credit begins to phase out also increases allowing more taxpayers to benefit.
4. The standard deduction has increased substantially to $12,200 for single filers and $24,400 for married
couples.
5. The deduction for state and local income taxes and property tax has been limited to $10,000.
This will probably cause real estate to decrease in value.
6. The mortgage interest deduction has
been limited to those loan balances up to $750,000 for debt incurred after 12/15/17 which is used to buy, build, or improve
your primary or secondary home.
7. The interest deduction on home equity loans has been changed.
Interest paid on these loans for money used to buy, build, or improve a taxpayer's home is still deductible. However,
if the money from these loans is used for personal reasons such as paying off credit card debts or buying a car, it is not
deductible. If you convert these loans to a first mortgage then if becomes 100% deductible.
8. The
threshold for deducting medical expenses has been reduced from 10% to 7.5% of your adjusted gross income for 2019.
9. The following miscellaneous deductions are no longer deductible in 2019:
a. Unreimbursed business expenses
b. Fees for investment advice
c. Union dues
d. Legal fees related to divorce or producing income
e. Safe deposit box fees
f. Tax Preparation fees
g. Uniforms
10. Alimony payments will no longer be deductible
by the payer and taxable income to the recipient for any divorce agreements that were entered into after 12/31/18.
11. The moving expense deduction has been eliminated for everybody except military personnel.
12. The investment income of a child known as the "Kiddie Rate" will be taxed at trust income tax rates which
are higher than the old income tax rates.
13. In 2019 the 529 Plans can now be used for private
or religious school tuition grades K-12, in addition to college.
14. The new law increases the estate
tax exclusion to $11.4 million per couple or $5.7 million for individuals. Therefore, fewer estates will be subject to taxation.
15. The gift tax exclusion is $15,000 per year per donee in 2019.
16. The
Alternative Minimum Tax (AMT) has not been repealed but they have increased the exemptions which mean less people will be
subject to it in 2019.
17. The individual mandate to purchase health insurance under Obamacare has
been repealed for 2019.