The income levels to qualify for the health premium credit in 2019 go up. The credit is available for people with household incomes ranging from 100% to 400% of the federal poverty level…$12,140 to $48,560 for singles and $25,100 to $100,400 for a family of four…who buy health insurance through one of the exchanges. Individuals eligible for Medicare or other federal insurance don’t qualify for a credit. Nor do people who can get affordable health coverage through their employer.
The annual cap on deductible contributions to HSAs rises in 2019 to $3,500 for self-only coverage and $7,000 for account owners with family coverage. Qualifying policies must limit out-of-pocket costs for deductibles and copayments to $13,500 for family health plans and $6,750 for people with individual coverage.
Tax rates on long-term capital gains and qualified dividends do not change. But the income thresholds to qualify for the various rates go up for 2019. The 0% rate applies for individual taxpayers with taxable incomes up to $39,375 on single returns, $78,750 for joint returns and $52,750 for head-of-household filers. The 20% rate starts at $434,550 for singles, $461,700 for heads of household and $488,850 for couples filing jointly. The 15% rate is for filers with taxable incomes between the 0% and 20% break points. The 3.8% surtax on net investment income kicks in for single people with modified AGI over $200,000…$250,000 for marrieds. Minimum policy deductibles stay at $2,700 for families and $1,350 for individuals.
Alimony paid under post-2018 divorce agreements is not deductible, and ex-spouses aren’t taxed on alimony they get under post-2018 agreements. Older divorce pacts can be modified to follow the new tax rules if both parties concur and they modify the agreement in 2019 or later to specifically adopt the tax changes.
You can give up to $15,000 each to a child, grandchild or any other person in 2019 without having to pay gift tax or tap your lifetime estate and gift tax exemption.
The first $1,100 of net unearned income of a child, someone under age 19, or under age 24 if a full-time student…is tax-free. The next $1,100 is taxed at the child’s rate. Any unearned income exceeding $2,200 is taxed at the ordinary income and capital gains rates above that apply for trusts. Earned income of children is taxed at the individual tax rates for single filers.
Many key dollar limits on IRAs and retirement plans are higher for 2019. The maximum 401(k) contribution rises to $19,000. People born before 1970 can contribute an extra $6,000. These limits apply to 403(b) and 457 plans as well. The cap on SIMPLEs climbs to $13,000. People age 50 and up can put in $3,000 more.
The 2019 payin limit for traditional IRAs and Roth IRAs jumps to $6,000. Individuals who are age 50 and older next year can contribute an additional $1,000. The income ceilings on Roth IRA payins go up. Contributions phase out at AGIs of $193,000 to $203,000 for couples and $122,000 to $137,000 for individuals. Deduction phaseouts for traditional IRAs start at larger amounts for 2019, from AGIs of $103,000 to $123,000 for couples and $64,000 to $74,000 for singles. If only one spouse is covered by a plan, the phaseout zone for deducting a contribution for the uncovered spouse will start at $193,000 of AGI and top out at $203,000.
The Social Security annual wage base is $132,900 for 2019, up $4,500 from 2018’s cap. The Social Security tax rate on employers and employees remains at 6.2%. The employer’s share of Medicare tax stays at 1.45% of all pay. The employee’s share is 1.45%, too, but employees also pay the 0.9% Medicare surtax on wages that exceed $200,000 for singles and $250,000 for married couples. This extra levy doesn’t hit employers. Self-employeds are also subject to the surtax.
The 2019 standard mileage rate for business driving rises to 58¢ a mile, up 3.5¢ from 2018. Businesses with four or fewer vehicles can use this rate, but each vehicle’s basis must be reduced by the depreciation component…26¢ a mile. The rate for medical travel and moving is going up 2¢, to 20¢ per mile. But the charitable driving rate will stay put at 14¢ a mile. It’s fixed by law. You can also claim the cost for parking and tolls. But you can’t add the cost of fuel or repairs. Nor can you use these rates if you depreciated or expensed the car.
$1,020,000 of assets can be expensed in 2019, and this amount phases out dollar for dollar once over $2,550,000 of assets are put into service during 2019.
Here’s an idea to help a child or grandchild who will be working this summer: You can contribute to a Roth IRA for him or her…up to $6,000 for 2019, but not more than the child’s 2019 earnings. Inside the Roth, earnings grow tax-free. If you go down this path, you have until April 15, 2020, to make the contribution. The payin counts toward your $15,000 gift tax exclusion ($30,000 if married). This can provide a nice nest egg. And there are key tax advantages to Roths: All distributions made after age 59½ are nontaxable. Contributions can be pulled out free of tax at any time. And when the child is ready to buy his or her first home, $10,000 of earnings can be taken out tax-free.
Hiring your children can lower your payroll tax bill. No FICA tax is due if sole proprietors or husband-wife partnerships hire their kids who are under age 18. Ditto if the kid works for a parent’s one-person LLC that’s disregarded for tax purposes. Also, federal unemployment tax is not owed on their salaries until they reach 21.