Looming Tax Changes Cause Concern

By Aaryn Frazier, January 11, 2019

State and national tax changes for 2019 have tax preparers and filers concerned about the negatives outweighing the positives.

According to money.usnews.com, the following are a list of changes made to the 2019 tax filing process: Tax rate changes, Charitable and medical deductions Alimony payments, Child tax credits, Business income and Estate planning changes.

Jeannie Richards, tax preparer and owner of Check It Out in Ottumwa, said there will be No more personal and dependent exemptions.

“The $4,050 personal exemption that taxpayers claim for themselves, spouses and dependents are no longer available in 2019,” said Richards. “Currently, you can still deduct personal exemptions for the 2017 tax year.”

  • The Standard Deduction doubles.

For 2019, the standard deduction increases to $12,000 for single and married filing separate filers, $18,000 for heads of households, and $24,000 for joint filers. It’s twice the amount of the 2017 standard deductions which were $6,350 for single and married filing separately, $9,350 for the head of household and $12,700 for joint filers. This will make it harder for taxpayers to itemize their deductions.

  • The Child Tax Credit (CTC) increases until 2025.

For qualifying children under 17, the CTC doubles from $1,000 to $2,000. Dependents must also have a social security number for this credit. Moreover, the TCJA combines the Additional Child Tax Credit (ACTC) with the CTC. Filers can then receive a refundable credit of up to $1,400 after removing their tax.

  • A new dependent credit is here.

If filers want to claim a non-dependent, (meaning someone who is not a qualifying child under age 17) they can do so and receive $500 for this credit. The non-dependent must be either a full-time student or disabled.

  • State and Local Taxes (SALT) deduction have a cap of $10,000.

Beforehand, there was not a limit in place for a SALT deduction but now, there will be a noticeable difference for taxpayers with greater amounts of state and local taxes.

  • Miscellaneous itemized deductions are eliminated.

In prior years, filers could deduct their itemized deductions such as un-reimbursed job expenses, tax preparation fees, and other expenses as long as they exceed 2% of their adjusted gross income.

In 2019, the following expenses cannot be deducted:

  • Moving expenses (excluding members of the armed forces)
  • Travel expenses
  • Meal expenses
  • Professional and union dues
  • Business liability insurance premiums
  • Depreciation in mandatory items such as computer or phone usage
  • Employee education expenses
  • Home office expenses
  • Job-seeking expenses
  • Supplies and uniforms
  • Investment fees
  • Tax preparation fees
  • Hobby expenses
  • Natural disaster expense deductions are allowed only if the location is a disaster zone.

Now, filers can only deduct expenses from natural disasters if it falls under a designated disaster zone. 

  • No more alimony deductions.

The TCJA declared filers cannot deduct their alimony payments on your tax return. This means that divorcees who make alimony payments can no longer deduct that amount on their federal taxes. This applies to divorces after December 31, 2018.

  • Mortgage interest deduction receives a cap of $750,000.

Prior to this, taxpayers could deduct up to $1 million in mortgage interest whereas now, it’s cut by 25%. On top of that, the new cap of $750,000 applies to residences purchased after December 15, 2017.

  • The Home Equity Interest Deduction disappears.

For 2018-2025, the interest paid on home equity loans and lines of credit are no longer available. However, the IRS states that they are still deductible as long as they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.

“For example, you cannot deduct the use of the loan for credit card debt and living expenses. The loan must also be a qualified residence such as a homeowners’ main or second home and not exceed the cost of the home,” explained Richards. “People that travel for work are going to get the short straw end of the deal. Some may benefit a little bit at a state level, but all the non reimbursed employee expense is completely gone this year. Standard deduction doubles so that does help.”

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