Many of the numbers coming out of Washington that impact
our tax and retirement planning lives are different in 2019, just
as they tend to be every year.
“Chained” Consumer Price Index (CPI) is now used to adjust
most tax-related numbers.
Chained CPI is generally lower than
CPI. For 2019, it is about 2%. While the difference is subtle,
use of this factor makes annual tax-related adjustments less
favorable for taxpayers.
Seven tax brackets, ranging from 10% to 37%, were carried
over from the 2018 tax year. In 2019, the taxable income range
within each of the seven brackets will increase by about 2%.
This will result in a modestly-lower tax bill for a given taxable
income compared to 2018.
The standard deduction was increased by $200 for single
taxpayers and by $400 for married filing jointly. Additional
deductions are still available for those who are blind and/or
age 65 and older.
The federal gift and estate tax exclusion increased 2% from
$11.18 million to $11.40 million. The portability provision
remains, allowing a married couple to shield $22.8 million
from federal estate taxation. The annual gift tax exclusion
remains at $15,000.
Provisions ending in 2019 include: 1) the ability to treat alimony
payments as a deduction for the payer and as taxable income
for the payee for divorces finalized after 2018 and 2) the ability
to deduct medical expenses exceeding 7.5% of Adjusted Gross
Income (AGI). The medical deduction threshold starting in
2019 is 10% of AGI.
Several contribution limits were increased for 2019. The
increase is $500 for 401(k)/403(b)/457, Traditional/Roth
IRA, and SIMPLE IRA plans. Catch-up contribution limits are
unchanged from 2018.
Inflation adjustments for Social Security benefits are based on
actual CPI (not chained). The 2018-to-2019 benefits increase
is 2.8% - the highest since 2012. The ceiling on wages taxed
for Social Security purposes increased 3.5% from $128,400
to $132,900. While this will not make current high-income
workers happy, the good news is that it will pump additional
funding into the system.
Medicare premium increases were modest. Combined Part
B and Part D monthly premium costs increased by 90 cents
to $1.50 in the first five Medicare premium tiers. A 6th higher-premium
tier was added for a Modified AGI threshold of
$500,000 single and $750,000 married filing jointly. Again, this
will not make high-income retirees happy but will help keep
the program solvent at least for the near term. Medicare
premiums for 2019 are based on 2017 Modified AGIs.
Don’t confuse these new 2019 numbers when preparing your
2018 taxes. They will come into play in 2020 when you prepare
your 2019 income taxes.
Consult with your tax professional and
Wealth Advisor.
This material is provided for general information purposes only. Canandaigua National Trust Company of Florida is an affiliate of Canandaigua National Bank & Trust. Investments are not FDIC insured, not bank deposits, not obligations of, or guaranteed by, Canandaigua National Bank & Trust or any of its affiliates, including Canandaigua National Trust Company of Florida. Investments are subject to investment risks, including possible loss of principal amount invested. Past performance is not indicative of future investment results. Before making any investment decision, please contact your legal, tax or financial advisor. Investments and services may be offered through affiliate companies.
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