Important 2019 Tax Year Changes

What’s Changed?

As 2019 wraps up, it’s time to start thinking about the upcoming tax season. We looked at some key changes to the 2019 tax year that may affect you.

Penalty on the Individual Mandate

From 2014 to 2018, many taxpayers were required to show proof of their health insurance. For those who failed to have the required coverage, a penalty was imposed. Previously, the penalty was the greater of 2.5% taxable household income or $695 per uninsured adult and $347.50 per uninsured child, up to a maximum of $2,085.

Starting in 2019, the mandate penalty was reduced to zero. The mandate wasn’t fully repealed in 2019, so there is still a requirement that nearly everyone maintain health insurance. However, the burden of the penalty has been removed.

Annual Retirement Contribution Limits

There were slight increases to the retirement contributions for the 2019 tax year. While they may seem minor, some of the limits hadn’t been changed since 2013!

Type 2018 Limit 2019 Limit Change
401(k) Base 18,500 19,000 500
401(k) Catch-up 6,000 6,000 -0-
IRA Base 5,500 6,000 500
IRA Catch-up 1,000 1,000 -0-

Remember, contributions to tax-advantaged retirement accounts might allow taxpayers to lower their tax burden. Ask us how!

Annual HSA Contribution Limits

Health Savings Accounts allow taxpayers to contribute pre-tax dollars to be used towards qualified medical expenses like doctor visits, medical procedures, and prescriptions.

For those with high-deductible policies that qualify under HSA guidelines, the changes are as follows:

Type 2018 Limit 2019 Limit Change
Self-only coverage 3,450 3,500 50
Family coverage 6,900 7,000 100

Medical Expense Deduction Threshold

As many of you may know, the standard deduction was virtually doubled in 2018, resulting in many taxpayers receiving an additional benefit compared to their lower itemized deductions.

For the taxpayers who continue to itemize, the medical threshold for unreimbursed expenses has returned to 10% of adjusted gross income, up from 7.5% of adjusted gross income in 2018.

Changes to Alimony

For divorces finalized on or after January 1, 2019, alimony payments can no longer be considered a deduction to the spouse paying them or a source of income to the spouse receiving them.

For divorces finalized prior to January 1, 2019, alimony paid is deductible and alimony received is included in taxable income.

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