We are currently in the second tax season after the significant federal tax law changes promulgated by the 2017 Tax Cuts and Jobs Act (the “2017 Tax Act”).  While there are no major changes from last year, there are some items to note when working with your tax advisor to prepare your 2019 individual income tax return.

Higher Standard Deduction

The 2017 Tax Act nearly doubled the standard deduction from previous years for tax years starting in 2018. The Joint Committee on Taxation estimated that this increase would lead to an estimate of roughly 90% of taxpayers taking the standard deduction. 

The current standard deduction increased from last year as follows: from $12,000 in 2018 to $12,200 in 2019 for single filers and from $24,000 in 2018 to $24,400 in 2019 for taxpayers who are married filing jointly.  The additional standard deduction for taxpayers who have reached 65 or who are blind in 2019 is $1,300 for each married taxpayer or $1,650 for unmarried taxpayers.

Increased Income Limitations for Medical Deduction

The Internal Revenue Code allows taxpayers to deduct qualified medical expenses that exceed a percentage of their adjusted gross income (“AGI”).  The 2017 Tax Act temporarily reduced the threshold from 10% of AGI to 7.5% of AGI.  However, the threshold returns to 10% in 2019 so taxpayers will need to use this higher percentage to determine whether they qualify for the deduction.

Elimination of Alimony Deductions

For divorces finalized after December 31, 2018, alimony payments are neither deductible to the payer nor counted as taxable income to the recipient.  This is the opposite of what previous law provided.

An End to Obama Health Insurance Penalties  

The Affordable Care Act required most individuals to obtain acceptable health insurance coverage for themselves and their families; failure to comply resulted in a penalty calculated on the individual’s income tax return.  The 2017 Tax Act reduced this penalty to zero for the 2019 tax year and beyond.  As a result, individuals will no longer be penalized for failing to obtain or maintain acceptable health insurance coverage.   

We strive to stay abreast of developments that impact the clients that we serve.  If you have any concerns or questions regarding any impact to you, please contact your Boston Private advisor.