How will the new tax rates 2019 affect you?

Changes to the tax regulations are a common occurrence. The landscape of income changes on a regular basis and it makes sense to adjust the income tax laws accordingly. It usually is not much of a concern as long as you are aware of the changes.

The IRS (Internal Revenue Service) has revised the tax rates for 2019. These new tax rates are adjusted for inflation as the IRS does on a regular basis. If you were to compare the changes made in 2017 with the introduction of Tax Cuts and Jobs Act, the latest changes are almost negligible.

The inflation-adjusted tax rates would stand applicable from the 1st of January. Which means that taxpayers need not use these for filing 2018 tax returns filed in 2019. The changes would be effective for the filing of 2019 in the year 2020.

Per the IRS, they are going to follow a new method to adjust inflation into the tax rates. This would ensure a slower moving inflation measure rate and would affect the taxes that Americans must pay in the long run. The Congress’s Joint Committee on Taxation has revealed that the proposed changes would cost taxpayers a little over $133.5 Billion over a decade.

Adjusted Rates

  • There has been an increase in the standard deduction for single taxpayers and married individuals filing separately. The new deduction stands at $12,200 up by $200. The same for married individuals who file jointly has seen a $400 increase to $24,400. The standard deductions have seen a $350 rise for the head of households at $18,350.
  • The inflation-adjusted tax brackets for different categories are mentioned below.
    • Individuals with income above $510,300 and $612,350 for married couples who file jointly would have to pay 37% as taxes.
    • Individuals with income above $204,100 and $408,200 for married couples who file jointly would have to pay 35% as taxes.
    • Individuals with income above $160,725 and $321,450 for married couples who file jointly would have to pay 32% as taxes.
    • Individuals with income above $84,200 and $168,400 for married couples who file jointly would have to pay 24% as taxes.
    • Individuals with income above $39,475 and $78,950 for married couples who file jointly would have to pay 22% as taxes.
    • Individuals with income above $9,700 and $19,400 for married couples who file jointly would have to pay 12% as taxes.
    • Individuals earning less than $9,700 and $19,400 for married couples who file jointly would have to pay 10% as taxes.

Other Changes

  • Earned income credit is now up at $6,431 for taxpayers who are filing jointly and have three or more dependent children from the current $6,557.
  • The Alternative Minimum Tax exemption stands at $71,000 and is phased out eventually for individuals earning above $510,300 as single taxpayers. The same for married couples filing jointly is $111,700 and the phase-out begins with $1,020,600.
  • The earlier limit for employee’s contribution towards health flexible expenditure was $50. It has been increased to $2,700.
  • Apart from increasing the income tax levels and tax credits, the new modifications also get rid of a few things. The individual mandate is a good example of the same. It is the penalty that one had to pay for not maintaining the minimum health insurance coverage. It has been eliminated now.
  • And the personal exemption remains at $0 for the year 2019.

The above details should help you traverse through the waters of tax filing and returns for the current year without much confusion.