Page 13 - Supplement to Income Tax 2019

Estimating Your 2019 Taxes

nondiscrimination rules is increased to $125,000 (up from $78,750 if married filing jointly or a qualifying widow/
$120,000 in 2018). The threshold for treating officers as widower, $52,750 if a head of household, or $39,375 if
key employees under the top-heavy plan rules is $180,000 single or married filing separately. There is no tax (0% rate
(up from $175,000 in 2018). applies) on 2019 qualified dividends and eligible long-
term capital gains (collectibles gains and unrecaptured
Saver’s credit (page 512–513). The first $2,000 of eligible
contributions (including ABLE account contributions) Section 1250 gains are not eligible) if taxable income
made for 2019 may qualify for a 50%, 20%, or 10% does not exceed the applicable breakpoint. Even if taxable
retirement savings contribution credit (“saver’s credit”), income exceeds the breakpoint, the 0% rate rather than
depending on the taxpayer’s AGI. the 15% rate might still apply to a portion of the gains/
For married persons filing jointly, the 50% credit applies dividends, depending on how much of the taxable income
if 2019 AGI does not exceed $38,500, the 20% credit rate consists of ordinary income and how much is long-term
applies if AGI does not exceed $41,500, and the 10% credit gain plus qualified dividends; this will be figured on the
applies if AGI does not exceed $64,000. IRS capital gains rate worksheet.
For a head of household, the 50% credit applies if 2019 The breakpoint between the 15% and 20% rate is
AGI does not exceed $28,875, the 20% credit rate applies $488,850 if married filing jointly or a qualifying widow/
if AGI does not exceed $31,125, and the 10% credit applies widower, $461,700 if a head of household, $434,550 if
if AGI does not exceed $48,000. single, or $244,425 if married filing separately. Even if
For single individuals, married persons filing separately, taxable income exceeds the breakpoint, the 20% rate does
and qualifying widows/widowers, the 50% credit applies if not necessarily apply to the gains/dividends. If ordinary
2019 AGI does not exceed $19,250, the 20% credit rate income is only a small part of taxable income, the 15%
applies if AGI does not exceed $20,750, and the 10% credit or even the 0% rate may apply to some of the gains/
applies if AGI does not exceed $32,000. dividends; this will be figured on the IRS capital gains
rate worksheet.
The 15% or 20% rate is increased by the 3.8% tax on net
Non-Retirement Cost-of-Living Adjustments investment income if MAGI exceeds $250,000 if married
filing jointly or a qualifying widow/widower, $200,000 if
for 2019 single or head of household, or $125,000 if married filing
separately. If this threshold is exceeded, the 3.8% tax applies
Standard deduction amounts (pages 341-344). The basic to the lesser of the taxpayer’s net investment income, or the
standard deduction amounts for 2019 have increased MAGI over the threshold.
slightly to $24,400 for married couples filing jointly and
surviving spouses, $18,350 for heads of households, and First-year expensing (pages 720-722). For 2019, the
$12,200 for singles and married persons filing separately. expensing limit increases to $1,020,000 and the limit is
The additional standard deduction for taxpayers age phased out when qualifying purchases exceed $2,550,000.
65 or older or blind (pages 345–346) at the end of 2019 Thus, no expensing will be allowed if purchases are
is increased to $1,650 for single taxpayers and heads of $3,570,000 or more.
households (from $1,600), but is unchanged at $1,300 for Qualified business income (QBI) deduction (pages 590,
married persons (whether filing jointly or separately) and 705-706). For 2019, the taxable income threshold above
qualifying widows/widowers. which the QBI deduction may be reduced or eliminated
For a person who meets the definition of a dependent for is $321,400 if married filing jointly, $160,725 if married
2019, the basic standard deduction (pages 346–347) is the filing separately, and $160,700 if single, head of household,
greater of (1) $1,100 or (2) the dependent’s earned income or qualifying widow/widower.
plus $350 (but no more in total than the basic standard Kiddie tax (pages 492–495). For 2019, a child’s investment
deduction for the dependent’s filing status).
income over a $2,200 floor (was $2,100 for 2018) is
Rate brackets for net capital gain and qualified dividends generally taxed at the tax rates applicable to trusts and
(pages 111-114). The bracket breakpoints between the estates. For qualified dividends and net capital gain, the
0% and 15% capital gain rates, and between the 15% breakpoint between the 0% rate and the 15% rate is
and 20% capital gain rates, are increased for 2019. The $2,650, and the breakpoint between the 15% rate and the
breakpoint between the 0% rate and the 15% rate is: 20% rate is $12,950.

Supplement to J.K. Lasser’s Your Income Tax 2019 | 9