2019 Tax Law Changes: How the Tax Cuts & Jobs Act Impacts You

Tax Law Changes: 2019

For a complete guide to filing your income taxes from the 2018 tax year, read our 2019 Tax Guide.

How Tax Law Changes Could Affect Your 2018 Income Tax Return

The tax-filing season that just got underway is the first one under the major Tax Cuts and Jobs Act that was passed in late 2017. This was the biggest change in the U.S. tax code in more than three decades, so you’re probably wondering how these changes could affect your taxes this year.

Following is a look at some of the key tax law changes for 2019 – these went into effect for the 2018 tax year so will impact how you file your taxes in the spring of this year.

To Itemize or Not to Itemize?

Two of the biggest changes that will affect many taxpayers are the doubling of the standard deduction and elimination of the personal exemption. The new standard deduction will be $24,000 for married couples filing jointly, $18,000 for a head of household and $12,000 for single filers and married couples filing separately. Meanwhile, the $4,150 personal exemption has been repealed.

As a result of these changes, fewer taxpayers may decide to itemize deductions. This is because the total amount of itemized deductions may no longer be greater than the standard deduction. If this applies to your situation, the tax preparation process could be easier for you this year if you’ve itemized deductions in the past.

Tax reform also lowered individual tax rates across the board.

The child tax credit was also doubled from $1,000 to $2,000, $1,400 of which is refundable, while raising the phase-out income range for claiming the credit. As a result, more families will be able to claim this valuable credit.

More Beneficial Tax Law Changes for 2019 Filing

A few other beneficial changes of tax reform include the following:

• The adjusted gross income (AGI) threshold for deducting medical expenses has been lowered from 10% to 7.5% for tax years beginning after December 31, 2016 and ending before January 1, 2019 and has eliminated the minimum tax preference. This could benefit you if anyone in your family had major medical expenses during 2017 or 2018.
• The alternative minimum tax (AMT) exemption amount is raised to $109,400 for married couples filing jointly, $70,300 for singles and heads of household, and $54,700 for married couples filing separately. This change is expected to dramatically reduce the number of individuals who are subject to the severe complexities of AMT for the 2018 tax year and beyond. For any tax year beginning in a calendar year after 2018, the Act also indexes all of the amounts for inflation.
• The Affordable Care Act’s individual mandate requiring taxpayers to buy a qualifying health plan or pay a penalty has been repealed. The Affordable Care Act’s (ACA) individual mandate relating to the penalty was repealed, going into effect for months after December 31, 2018.

Deductions Eliminated or Reduced

The flip side of these beneficial changes is that tax reform eliminated or reduced some popular deductions. Most notably, these include the deductions for interest on home equity loans, moving expenses, alimony for agreements signed after 2018, and personal casualty and theft losses.

The legislation also set a combined limit of $10,000 for deductions of sales, property taxes, and state and local taxes, while reducing the size of a mortgage that qualifies for the home mortgage interest deduction from $1 million to $750,000. Note that if you bought your home before December 14, 2017, the old mortgage limit of $1 million still applies.