Taxes – a necessary evil, of course; but one that may be (slightly) easier to deal with in 2019 thanks to major updates to the Internal Revenue Code (IRC). Early on, the current administration announced an overhaul to the federal taxation system, something not seen in three decades. Important changes to the IRC include an adjustment to tax brackets, changes to deductions and credits, and various other nuances worth noting. As always, be sure to file on time with payment in full of any tax owed – as tax penalties will continue to loom for late- or non-filers.

 

Brackets & Deductions

Organized via a series of brackets (or “categories”), the federal taxation system determines the percentage rate of one’s income a taxpayer must pay. The income categories reflected in the brackets refer to an “adjusted gross income,” which is actually less than the raw gross income reflected in the W-2 or 1099 statement.

Beginning in 2018, adjustments to the bracket categories may result in an adjustment to the tax assessment for some folks. By comparison to years past, rates have reduced a few percentage points, and the seven income categories were adjusted to result in a 22 percent tax rate for those joint-filers earning between $77,400 and $165,000 (or $38,7000 to $82,500 for singles). Review the new bracket here.

Changes to allowable deductions in 2018 are also somewhat sweeping, and definitely worth reviewing. Many taxpayers opt to take the “standard deduction” when filing a return, which eliminates the need to itemize deductions one by one (and results in a higher deduction for many). Under the changes, the standard deduction has doubled for everyone, including a $12,000 deduction for single filers, $24,000 deduction for married couples, and an $18,000 deduction for those filing as head of household.

Other changes to deductions worth noting include the student loan interest deduction, which remains stagnant at $2,500 for some, while the deduction will be phased out completely for higher wage earners (e.g., in excess of $135,000 adjusted gross income for joint filers).

 

Filing & refunds

Much remains unchanged concerning the deadlines to file personal and business income tax returns. As usual, personal returns are due on or before April 15, 2019, and the extended deadline remains October 15, 2019. The recent federal government shutdown does not impact these deadlines, and filers must have their return postmarked by the due date or penalties apply.

The IRS began officially accepting 2018 tax returns on January 28, 2019 – and taxpayers should anticipate a 10-day to two-week wait for direct deposit refunds (and longer if requesting a paper check). Given the doubled standard deduction and decreased tax rate, many Americans anticipate a higher refund than usual – while the top wage-earners may benefit strongly from the 2018 changes in terms of after-tax income.

 

Odds & Ends

The sweeping changes to the IRC and its effect on individuals and businesses spans a number of categories – many of which are highly specific to certain occupations or situations. One area common to all, however, is the repeal of the Obama-era tax imposed upon anyone without healthcare coverage – a measure which many believe will result in several million Americans being dropped from plans which employers deemed as “mandatory” under the old tax plan. Other changes include deductions for alimony payments and moving expenses (for non-military employees) – these have been eliminated – while the allowable deduction for medical expenses expanded to allow folks with significant medical bills amounting to 7.5% of their income or greater to reduce their overall tax liability.

The post Updates and Changes to the Tax Code appeared first on AvvoStories.

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  3. WesleySmery

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