2019 Client Letter
Hello and Happy New Year,
I hope this letter finds you well! At first I didn’t think I would have a lot to tell you about the new tax year. All the big changes occurred in 2018 making this tax season almost a carbon copy. Then the President signed into law (on December 20, 2019) the Consolidated Appropriations Act of 2020. I will condense the over 700 pages and list the most popular provisions, but first a few Annual Inflation Adjustments:
Standard Deduction amounts have increased as follows. Married Filing Joint $24,400; Head of Household $18,350; Single and Married Filing Separate $12,200. While there is no change to the additional standard deduction for those 65 or older or blind at $1,300, the additional standard deduction is increased to $1,650 if you are also unmarried.
Standard Mileage Rate has increased to $0.58 per mile.
Contribution Limits for Retirement Accounts has increased. For employees who participate in 401(k), 403(b) and most 457 plans increased from $18,500 to $19,000. Catch up contributions remain at $6,000. IRA’s increased from $5,500 to $6,000 with catch up contributions (age 50 and over) remaining at $1,000.
A reminder about Alimony. You may remember from last year Under the Tax Cuts and Jobs act, Divorce or Separation Agreements executed after 12/31/18, which include Alimony, are not deductible by the payor or included in income of the recipient. This means that an agreement executed before 12/31/18 is still deductible or included, even when payments are made after 2018. Massachusetts does not adopt this change, and as of the writing of this letter, states that Alimony will continue to be deductible by the payor, and included in Gross Income of the recipient.
The Affordable Care Act Individual Mandate Penalty has been eliminated for 2019 on your Federal Tax Return. However, Massachusetts Residents may still face a penalty for failure to obtain health insurance.
Included in the above mentioned Appropriations Bill are a number of tax law changes, including extenders that had previously expired at the end of 2017 and retirement plan funding and distribution reform. Pay close attention to the Extenders, if affected you may want to amend your 2018 tax return.
Extension of Previously Expired Provisions:
- Cancellation of qualified principal residence indebtedness exclusion from gross income has been extended through the end of 2020.
- Mortgage Insurance Premiums Deduction has been extended through the end of 2020.
- Medical expense AGI limitation threshold reduced from 10% to 7.5% of AGI for all taxpayers through the end of 2020.
- Tuition and fees deduction has been extended through the end of 2020.
Retirement Plan Provisions:
- The starting date for making required minimum distributions from an IRA is the year the owner turns 72 (up from 70 ½).
- Non-spouse inherited IRAs are now subject to a 10-year maximum distribution period (up from 5 years).
- Long-term part-time employees qualify to participate in a 401(k).
- 401(k) plans are permitted to adopt qualified birth or adoption distributions.
- Qualified birth or adoption distributions up to $5,000 are exempt from the early-withdrawal penalty.
I have been digging for information about the starting date for the IRS to accept tax returns, but I have yet to come up with a definitive answer. As of the writing of this letter the IRS website is still geared towards the 2018 tax filing season. The best I can offer is the Form 1040 on my software will be e-file ready on January 21st. Regardless, I am here and ready to go. Give me a call to set your appointment, and remember drop offs are always welcome.
Web version update: IRS opens for e-file on January 27, 2020
Here are the directions to my office:
From Rt. 2 East or West, take exit 19 for Phillipston.
At the end of the ramp, turn left onto 2AWest.
Turn left, directly after the King Phillip Restaurant, onto Baldwinville Road.
Bear right at Phillipston Center, you are now on Petersham Road
Follow Petersham Rd. approximately 1 mile, I am the 5th visible house on the left,
featuring a deck out front, across from a large red barn.