5 Things You Need To Know This Tax Season
It's that time of year again — tax season! Here are five things that you should know about filing your taxes 2019 taxes.
The Standard Deduction Increased
The 2018 tax reform law doubled the standard deduction and was a welcomed change to tax reform for most Americans. As an automatic reduction, the standard deduction reduces what you owe in taxes, and it went up slightly again this year to adjust for inflation.
When you file your taxes, you can either take the standard deduction or itemize your deductions. Depending on whether your itemized deductions exceed the amount of the standard deduction or not, you may want to go through the extra hassle of calculating your deductions one by one.
The Income Brackets Increased To Adjust For Inflation
The tax rate that they pay is dependent on what tax bracket you fall into. For example, if you're married and you file jointly, and your joint income is $100,000, you'd be in the 22% tax bracket. However, that doesn't mean that your entire income is taxed at a flat rate of 22%. Rather, your income is taxed in several brackets, with the first $9,700 being taxed at 10%, from $19,401 to $78,950 taxed at 12%, and $78,951 - $100,000 taxed at 22%.
Although the tax rates remain the same for the 2019 tax year, the brackets have been adjusted slightly by a few hundred dollars to account for inflation.
The Threshold for Medical Expenses Deduction Increased
There is more good news for filers this year — for your 2019 taxes, you can deduct any unreimbursed medical expenses that exceed 10% of your adjusted gross income (AGI). Your AGI is calculated by taking your total income minus any other deductions you take.
This is an increase of 2.5% from the original 2018 tax reform law, which allowed taxpayers to deduct expenses above 7.5%.
The Estate Tax Exemption Has Increased
The Estate Tax is a tax on the transfer of property at death. To calculate estate tax, you must account for the fair market value of everything you own at the date of death. This is not necessarily equal to what was paid for them or what their value was when they were acquired. The total sum of all of these items is called your "Gross Estate," and can include real estate, cash, and securities, trusts, annuities, and business interests — plus any other assets.
For the 2019 tax year, taxpayers can now inherit up to $11.4 million — up from $11.2 million last year — over their lifetime before they have to pay the 40% estate tax.
The Penalty for Having No Health Insurance Is Gone
The Affordable Care Act penalty is no longer, so if you didn't have health insurance at any point in 2019, you don't need to worry about being fined.
Although it's nice to know that the penalty is no longer, that's not an excuse not to have adequate health insurance. Although expensive, falling ill without health insurance can be a lot more costly and detrimental to your finances in the long term.
Nothing is guaranteed in life apart from taxes and death, so avoid potential penalties by filing your taxes on time. You have until Tax Day (April 15th) to ensure you meet the IRS deadline, however filing early can help save a lot of stress, so try not to leave your taxes until the last minute!
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All information and materials in this article are for educational purposes only. Opinions expressed in this article are based on information considered reliable, but The Daily Money Show cannot guarantee the accuracy of the information nor should it be relied upon. The information discussed in this article should not be used as a recommendation to buy or sell securities nor should it be taken as investment advice. The Daily Money Show is not a Registered Investment Advisor or Broker Dealer. The Daily Money Show is not an accounting firm and does not give tax advice regarding any security or real estate transaction. You may want to consult with an accountant, attorney, real estate agent or financial advisor before proceeding with any transaction regarding securities or real estate.