The 2019 changes are really slight adjustments from the major changes enacted in 2018 by the Tax Cuts and Jobs Act. The main takeaway is to use this information to set your withholding tax, tax estimates, and tax planning in the right direction for 2019.

The New 2019 Federal Income Tax Brackets & Rates

Federal income tax brackets and rates for 2019 are shown below. Indexing has increased the income brackets by roughly 2% across the board.

Tax Bracket / Filing Status

Single

Married Filing Jointly or Qualifying Widow

Married Filing Separately

Head of Household

10%

$0 to $9,700

$0 to $19,400

$0 to $9,700

$0 to $13,850

12%

$9,701 to $39,475

$19,401 to $78,950

$9,701 to $39,475

$13,851 to $52,850

22%

$39,476 to $84,200

$78,951 to $168,400

$39,476 to $84,200

$52,851 to $84,200

24%

$84,201 to $160,725

$168,401 to $321,450

$84,201 to $160,725

$84,201 to $160,700

32%

$160,726 to $204,100

$321,451 to $408,200

$160,726 to $204,100

$160,701 to $204,100

35%

$204,101 to $510,300

$408,201 to $612,350

$204,101 to $306,175

$204,101 to $510,300

37%

$510,301 or more

$612,351 or more

$306,176 or more

$510,301 or more

 

Medical Expense Deduction

Due to the large increases in standard deductions, fewer people will itemize their deductions from 2018 on. But if you do, you’ll be able to itemize unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI). For 2019, that threshold increases to 10% of AGI, further reducing that deduction.

Alimony.

A major change will take place beginning in 2019. Through the end of 2018, alimony payments have been deductible by the payor, and taxable to the recipient. But for divorce decrees issued after December 31, 2018, alimony will neither be deductible by the payor, nor taxable to the recipient.

However, for divorce decrees issued before January 1, 2019, alimony will remain tax deductible to the payor, and considered taxable income to the recipient.

Retirement Contributions.

Base retirement contributions are increasing by $500 in 2019. However, catch-up contributions for taxpayers 50 and older have not been increased.

For 2019, retirement plan contributions will look like this:

  • IRAs – $6,000 (up from $5,500 in 2018), plus a $1,000 catch-up contribution if you’re 50 or older.
  • Employer sponsored plans – 401(k), 403(b), 457, TSP – $19,000 (up from $18,500 in 2018), plus a $6,000 catch-up contribution if you’re 50 or older.

The lifetime gift and estate tax exemption increased from $11.18 million in 2018 to $11.4 million in 2019. The annual gift exclusion will be $15,000, unchanged from 2018.

Qualified Business Income Deduction.

Beginning in the 2018 tax year, the new tax law provides small business owners with a 20% deduction against business income. It’s officially referred to as the Section 199A deduction, and it applies to small businesses, other than “C” corporations.

There are income limits against which that deduction can be taken. The income thresholds for both 2018 and 2019 are as follows:

Filing Status

2018

2019

Single

$157,500

$160,700

Married filing jointly

$315,000

$321,400

Alternative Minimum Tax (AMT). The AMT was created in the 1960s to impose taxes on taxpayers who claim an excessive amount of tax breaks. It provides a second set of tax rates that will be imposed if they exceed taxes as their taxable income is normally calculated.

The tax code provides an income exemption to the AMT, below which the tax will not apply. There is also in an income phase-out beyond which the exemption no longer applies. Both are indexed for inflation. The figures for 2019 will be as follows:

Filing Status

Exemption Amount

Exemption Phaseout

Single

$71,700

$510,300

Married filing jointly

$111,700

$1,020,600

 

The Standard Deduction for 2019

As you probably know in tax year 2018 personal exemptions have been eliminated under the new tax law.

In its place, the standard deduction has been roughly doubled. That will work out well for singles and couples, but it will be a definite negative for anyone with dependents.

And like other numbers in the tax code, the standard deduction will be increasing slightly for 2019. Here’s how that will look:

Filing Status

2018

2019

Single

$12,000

$12,200

Married filing jointly

$24,000

$24,400

Head of Household

$18,000

$18,350

 

The New 2019 Federal Income Tax Brackets and Rates for Capital Gains

Capital gains are taxed at different rates from ordinary income. For example, while there are seven tax brackets for ordinary income, ranging from 10% to 37%, there are just three for capital gains, ranging from 0% to 20%.

This is a major advantage for anyone who has substantial capital gains income. The capital gains tax rate is substantially lower than the tax rate on a comparable amount of ordinary income.

Just as is the case with the income brackets for ordinary income, the income brackets for capital gains have also been increased slightly from 2018.

Tax Rate

Single

Married Filing Jointly

Heads of Households

0%

$0 to $39,375

$0 to $78,750

$0 to $52,750

15%

$39,376 to $434,550

$78,751 to $488,850

$52,751 to $461,700

20%

$434,551 or more

$488,851 or more

$461,701 or more