IRS Announces Tax Brackets and Inflation Adjustments for 2019
What you need to know to plan for the 2019 tax year
There’s little worse than an unpleasant surprise during tax season, but you can avoid one or more of them if you have a good idea of your liabilities as you start the new year, and—just as important—if you know the amounts of any tax perks the government is willing to toss your way. It can pay to know current income limitations and the amounts of various credits and deductions so you can plan your year accordingly.
The Internal Revenue Service obligingly publishes a list of updated figures and inflation adjustments each November, scheduled to go into effect at the first of the year. And there are usually quite a few of them, as many as 40 or so annually.
You can find a full list for 2019 in Revenue Procedure 2018-57, but these are the key adjustments.
This is advance planning! You won’t be using these numbers to prepare your 2018 tax return in 2019, but rather to monitor when and how you spend and earn money beginning in 2019.
The 2019 Tax Brackets
The IRS increases the income perimeters for each tax bracket annually. This means you can earn a little more than you did last year without paying a greater percentage of taxes…but don’t get too excited. The difference is just a few hundred dollars in some cases.
For example, you paid 10% on the income you earned in 2018 up to $9,525 if you were single. That increased to $9,700 in 2019—a difference of just $175.
A penny saved is a penny earned just the same, and the changes are more significant at higher income levels. The 24% tax bracket started at incomes of $82,500 in 2018. It's $84,200 in 2019, a difference of $1,700.
Here’s how it breaks down for each filing status:
|2019 Federal Tax Brackets|
|Tax Rate||Unmarried: Taxable Income Over||Married Filing Jointly: Taxable Income Over||Heads of Household: Taxable Income Over|
These are the same percentage rates and tax brackets that went into effect with the Tax Cuts and Jobs Act (TCJA) in 2018, but each accommodates a little more income in 2019.
2019 Standard Deductions and Personal Exemptions
Personal exemptions were eliminated under the terms of the TCJA and that doesn’t change in 2019—you still can’t claim them for yourself or any of your dependents, at least through 2025 when the TCJA potentially expires.
But the amount of standard deductions has increased just a bit, as it generally does each year to keep pace with inflation. The standard deductions for 2019 are:
- $12,200: Single taxpayers (up from $12,000)
- $12,200: Married taxpayers filing separate returns (up from $12,000)
- $24,400: Married taxpayers filing joint returns (up from $24,000)
- $24,400: Qualifying widow(er)s (up from $24,000)
- $18,350: Heads of household (up from $18,000)
Changes to Above-the-Line Adjustments to Income
Several deductions are available under the tax code that can reduce your gross annual income to arrive at your adjusted gross income (AGI) even before you get around to claiming the standard deduction for your filing status or itemizing deductions to reduce your taxable income. They’re called adjustments to income and a couple of these have been bumped up in 2019.
The limit for salary reductions for employees who contribute to health flexible spending accounts (HSAs) increased from $2,650 in 2018 to $2,700 in 2019.
The annual insurance deductible limits have also changed for those who have medical savings accounts, those who are covered by high deductible policies. They’re set at a bottom threshold of $2,350 for self-only plans—up from $2,300 in 2018—and an upper limit of $3,500, also up $50 from 2018.
The floor is a $4,650 annual deductible for family coverage up to a $7,000 maximum in 2019, a difference of $150 from 2018. The out of pocket expense limit for families is $8,550 in 2019.
Most Itemized Deductions Remain Unchanged
The IRS pretty much left itemized deductions alone in 2019, although they underwent a radical overhaul in 2018 due to the TCJA.
Technically, the deduction for charitable donations remains unchanged because it underwent a shift in 2018, its first in quite a while. The deductible percentage limit for charitable cash donations was 50% in 2017, then it went up to 60% in 2018…and there it remains. At least it hasn’t gone backward.
Another not-quite-a-change is the repeal of the Pease limitations that used to prohibit higher-income individuals from claiming the full amount of their itemized deductions. Those limits went away in 2018 under the TCJA, and they remain gone. So go ahead and itemize your heart out no matter how much you earn…always assuming that the total of your itemized deductions exceeds the amount of the standard deduction you qualify for so you don’t pay taxes on more income than you have to.
Unfortunately, the threshold for medical expense deductions reverts back to the 2016 percentage, up from 7.5% where it was set in 2017 and 2018 under the terms of the TCJA. The deductible portion of your health insurance premiums and uninsured medical expenses must once again exceed 10% of your AGI in 2019. You can only claim the balance as an itemized deduction.
As an example, you’ll need at least $8,000 in qualifying medical expenses to claim this deduction if your AGI is $80,000, up from $6,375 or 7.5% in 2018. Unlike in some previous years, this applies to all taxpayers regardless of age.
The cap on the state and local tax deduction (SALT) remains at $10,000, and this limit still includes property taxes. You might spend $15,000 on these taxes, but you can only claim $10,000, and that drops to $5,000 if you’re married and filing a separate return.
The mortgage interest deduction remains limited to acquisition loans of no more than $750,000, and to only those home equity loans where the proceeds are used to buy or substantially improve property. You can no longer claim the interest on equity loans if you use the proceeds to pay for college expenses or an unplanned emergency.
Miscellaneous itemized deductions for things like unreimbursed work-related expenses and investment costs were repealed in 2018, and no, they don’t get new life in 2019, either.
Changes to 2019 Tax Credits
The earned income tax credit—the one designed to help low-income taxpayers by putting some refunded money into their pockets—is almost invariably adjusted for inflation on an annual basis. Maximum credits are based on both income and the number of children you’re supporting as dependents. They’re set at the following figures in 2019:
- $6,557 for three or more children
- $5,828 for two children
- $3,526 for one child
- $529 if you have no children
These are maximum EITC amounts. Not all taxpayers will qualify for this much. Income limitations put a ceiling on how much each taxpayer can claim.
These are very minor increases from 2018, but it’s still money that Uncle Sam will give you to erase your tax bill and provide you with some cash back if you qualify. The maximum credit for three or more children was $6,431 in 2018, so it’s increased by just $126, but we’re betting that you’d rather spend this money on your family than give it to the government.
You can earn a little more in 2019 before you’re disqualified from claiming the Lifetime Learning tax credit for educational expenses incurred by you, your spouse, or your dependents. The amount of the credit begins reducing at AGIs of $116,000 for married taxpayers filing joint returns, up $2,000 from the $114,000 limit in 2018.
The child tax credit itself isn’t adjustable for inflation, but the refundable part of it is. Unfortunately, this doesn’t increase in 2019. It’s still a $2,000 credit with up to $1,400 of it refundable, same as in 2018. Income phase-outs remain set at AGIs of $200,000 for single taxpayers and $400,000 for those who are married and filing joint returns, same as in 2018.
The family tax credit for other dependents remains steady at $500 in 2019 as well.
You can still claim a tax credit for adoption expenses in 2019. These credits are set at $14,080 for special needs children and $13,810 for all other adoptions subject to income phase-out limits for higher earners. The same numbers apply to adoption assistance programs provided by employers. Assistance paid up to these limits remains excludable from income.
The Alternative Minimum Tax Exemption
The alternative minimum tax (AMT) got its start in 1969 when it dawned on Congress that some wealthier taxpayers were claiming so many tax deductions, they were able to reduce their tax bills to approximately zero. This didn’t make the government happy so the AMT was introduced.
It effectively adds deductions back to individuals’ incomes for purposes of tax calculations. It applies to income levels over certain exemption amounts—the higher earners targeted by this tax.
It’s imperative that these exemptions be adjusted annually to match inflation or an unintended consequence would occur: Some middle-income taxpayers could be pushed over the line and become subject to the negative tax consequences of a tax that was never designed to affect them in the first place, simply because of inflation.
So the exemptions have once again been increased in 2019. They’re set at $71,700 for single taxpayers and $111,700 for those who are married and file joint returns. If you earn less than these thresholds, the AMT is not your problem.
One Last Change
We’re not done quite yet. Congress has one last gift for taxpayers in 2019—the repeal of the shared individual responsibility penalty payable by those who neglected to purchase health insurance coverage under the terms of the Affordable Care Act (ACA). Yes, that nasty penalty is gone, although the ACA is still alive and well.
You won’t have to cough up your hard-earned dollars anymore if you can't afford or don't have coverage. The penalty was $695 in 2018. So go ahead and treat yourself to something healthy that won’t have you visiting the doctor.
The Tax Foundation. "2019 Tax Brackets," Accessed Oct. 22, 2019.
Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2019," Accessed Oct. 22, 2019.
Internal Revenue Service. "Publication 526, Charitable Contributions," Accessed Oct. 22, 2019.
The Tax Policy Center. "How Did the TCJA Change the Standard Deductions and Itemized Deductions?" Accessed Oct. 22, 2019.
The Tax Policy Center. "How Does the Deduction for State and Local Taxes Work?" Accessed Oct. 22, 2019.
Internal Revenue Service. "Publication 936 (2018), Home Mortgage Interest Deduction," Accessed Oct. 22, 2019.
Internal Revenue Service. "2019 EITC Income Limits, Maximum Credit Amounts, and Tax Law Updates," Accessed Oct. 22, 2019.
Internal Revenue Service. "2019 Instructions for Form 8863," Page 3. Accessed Oct. 22, 2019.
North American Council on Adoptable Children. "Adoption Tax Credit 2019," Accessed Oct. 22, 2019.