What are some of the new tax laws for 2019?

Jan. 09--Certified Public Accountant Alyssa N. Wright was the speaker at the first Chamber of Commerce meeting of the new year. Wright went over implications of the 2018 Tax Cuts and Jobs Act and tax changes -- and judging by the packed room at the Historic USO Building, there was a lot of interest in the topic.

After joking that she has not read the entire 2,600 pages of the 2019 IRS tax code, Wright launched into an apparently thorough discussion of changes to tax laws -- for both businesses and individuals.

For small businesses, she said top issues include the Section 199A deduction, which allows taxpayers other than corporations a deduction of 20 percent of qualified business income earned in a qualified trade or business, subject to some issues.

She added that the corporate tax rate is now 21 percent across the board, effective tax years beginning Jan. 1, 2018.

Wright said that in what she called an unfortunate development, entertainment expenses are no longer deductible -- although people can deduct 50 percent of the cost of business meals if they or their employee are present at the event and the food or beverages are not considered "lavish" or "extravagant."

Wright also noted that carryback of net operation losses (NOLs) is repealed effective for tax years ending after Dec. 31, 2017.

On the individual taxpayers side, she said, tax rates have changed.

"Though there are still set tax brackets for individual tax payers, many will find that they are in a lower tax bracket under this new system," Wright said.

She said that the new law increased the standard deduction through 2025 but has no personal exemptions. She predicted that this will mean more taxpayers will end up using the standard deduction.

New standard deductions include the following: $12,000 for single and married filing separately $18,000 for heads of household, and $24,000 for joint filers and surviving spouses.

There have been increases in estate and gift tax exemptions.

In 2018 estate tax exemption is $11.18 million. It will be $11.4 million in 2019.

The 2018 and 2019 gift tax annual exclusion is $15,000.

Wright cautions, however, that people should still look into estate planning even for smaller estates. She added that estate planning is more than minimizing estate taxes and includes updating documents, repurposing insurance, ensuring privacy and maintaining asset protection.

"Many things do have tax consequences that we often don't think about until it is too late," she said. These can include changing jobs, having children, planning for retirement, receiving a promotion with a raise, and transitioning parents to long-term care.

Wright noted that many tax changes are temporary and sunset after 2025, and several changes need guidance for more clarity.

She said that there are new tax brackets for 2018: "basically what we are seeing here is the rates have been reduced and the brackets have been extended."

She added that one of the biggest changes is the increase to standard deductions.

In addition, tax legislation also removed the ability to deduct certain itemized deductions and charitable contributions can only reduce the tax bill for those who choose to itemize on their taxes.

The fee or penalty for not having health insurance will be in effect for 2018. This is $695 per adult up to a family maximum of $2,085 or 2.5 percent of household income whichever is greater, unless you qualify for an exemption.

Wright said, however, that the penalty has been reduced to zero in 2019.

Provisions that expired at the end of 2017 include a tax exclusion for canceled mortgage debt, mortgage insurance premium deductibility and above-the-line deduction for qualified tuition and related expenses.

In another interesting development, she said, virtual currency transactions are reportable and taxable as property transactions and payments made using virtual currency to service providers are reportable and taxable.

Wright said 401k contribution limits did increase for 2018. The amount for taxpayers 50 and over remained the same but will increase in 2019. IRA contribution limits remained the same for 2018, but will increase to $6,000 for 2019.

In response to a question about the government shutdown, Wright said that the last she heard is that tax refunds will still be released as normal. Tax season is due to begin January 28.

Wright encouraged people to visit accountants as quickly as possible and to prepare returns ahead of time to file as soon as they are allowed.

For more information on tax changes, see irs.gov/taxreform

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