2019 Tax Insights: Deductions, Exemptions, and Credits
Understanding the tax landscape for the 2019 tax year is crucial for both individuals and families. The Tax Cuts and Jobs Act (TCJA) of 2017 marked significant changes in how personal exemptions, deductions, and credits affect tax returns. This article delves into these changes, providing detailed insights into tax submissions, credits, and deductions.
Exemptions and Standard Deduction
For the 2019 tax year, personal exemptions were eliminated due to the TCJA. Under the previous system, exemptions such as the $4200 personal exemption for the 2018 tax year allowed taxpayers to reduce their taxable income. However, this changed significantly, with the standard deduction increasing to $12,200 for single filers and $24,400 for married couples filing jointly.
Tax Filing Requirements
Taxpayers need to file a return if their gross income meets certain thresholds. For individuals who are unmarried and at least 65 years old in 2019, the threshold was set at $13,850. However, if that income is solely from Social Security benefits, it is not included in gross income, making it zero. For those with other income not exempt from taxes, any gross income above $13,850 would require a tax return. The tax filing requirements can be intricate, and consulting a professional may be beneficial.
Health Savings Accounts (HSA) Tax Benefits
In 2020, individuals could save up to $3,550 with a self-only Health Savings Account (HSA), an increase from $3,500 in 2019. Families could save up to $7,100, up from $7,000 in 2019. HSAs offer a triple tax advantage: the contributions are tax-deductible, the funds grow tax-free, and withdrawals for qualified medical expenses are also tax-free.
Child Tax Credit and Other Dependent Credits
The Child Tax Credit was partially refundable, allowing taxpayers to receive up to $1,400 in their tax refunds. To qualify, the child must be under 17 years old as of December 31, 2019, and the taxpayer must have earned income of at least $2,500. The Child Tax Credit was also available to qualifying adult dependents, with a credit of $500, even though it was not refundable.
Caregiver Credits
The Child and Dependent Care Credit remained in place, helping individuals who need to pay for care so they can work or look for a job. The credit covers up to 30% of care expenses, depending on income and the number of dependents. The maximum claimable is $3,000 for one child and $6,000 for two or more children, subject to specific conditions regarding income and eligibility.
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a vital benefit for lower-income families, especially those with children. For those without children in 2019, the EITC was available for incomes up to $15,570 ($21,370 for joint filers). The maximum credit was $529 without a dependent and $6,557 with three or more dependents. The EITC is refundable, meaning it can provide a refund even if you owe no tax or have no tax liability.
Education Tax Credits
The Lifetime Learning Credit (LLC) and the American Opportunity Credit (AOC) remained in effect, helping educate dependents. The AOC is $2,500 per student and up to 40% of it is refundable, while the LLC is up to $2,000 per student, limited to 20% of the first $10,000 of tuition and fees.
Student Loan Interest Deduction
Dependents can help qualify taxpayers for the student loan interest deduction, providing up to $2,500 in interest on qualified student loans. This deduction is available even without itemizing, providing an above-the-line adjustment to income. Although the TCJA initially aimed to eliminate this deduction, it was reinstated in final negotiations, making it a valuable tool for those repaying student loans.
Medical Expense Deduction
The medical expense deduction also benefits taxpayers who itemize. The threshold for deductions was adjusted from 10% to 7.5% of adjusted gross income for the 2019 tax year. This means that for 2019, taxpayers can claim a deduction for medical expenses that exceed 7.5% of their AGI, a reduction that impacted many taxpayers significantly.
These deductions and credits provide extensive support to individuals, helping reduce tax burdens and provide financial relief. Staying informed about tax changes and utilizing these benefits effectively can significantly impact your financial situation.