The Tax Cuts and Jobs Act of 2017 (TCJA) created some significant changes to the tax laws. They were some of the largest changes we have seen in a while. I have covered many of these changes in previous articles and the effects they had on 2018, and even 2017 tax years. The changes for 2019 are far less significant, but the most significant are addressed below. Several of them stem from the TCJA.

No Individual Mandate

The ever-controversial Affordable Care Act created the shared responsibility payment (commonly referred to as the individual mandate penalty), which applied to folks that were required to have health insurance, weren’t subject to an exemption, but failed to get coverage. If you owed the penalty, it was due with your tax return. The TCJA removed the penalty starting in 2019. So, if you didn’t have coverage and have been checking the box claiming you did, you can sleep easier when filing your return this year!

No Alimony Deduction

The TCJA eliminated the alimony deduction for divorce agreements made this year or thereafter. If you got divorced in 2019 those alimony payments are no longer deductible. This also means that the spouse receiving the alimony doesn’t need to claim the alimony as income. Perhaps this will lead to fewer divorces in 2019 and beyond?

Increased Contribution Limits

Retirement and HSA contributions maxes were increased for 2019. Employee 401k contributions were increased from $18,500 to $19,000. The max 401k contributions (employee and employer) for 2019 increased to $56,000 (this typically applies to business owners). The employee contribution max is set to increase to $19,500 for 2020, with the combined employee and employer max increasing to $57,000.

IRA contributions were increased from $5,500 to $6,000. This is significant, as it is the first increase since 2013. Income limits still apply. The IRA contributions will not increase for 2020, but the income limits will.

The often-underutilized HSA contribution max increased from $6,900 to $7,000 for family coverage and from $3,450 to $3,500 for single coverage. These amounts are set to increase to $7,100 family and $3,550 single coverage for 2020.

Higher Standard Deductions

One of the most significant changes the TCJA brought was an almost doubling of the standard deduction. The standard deduction changes each year due to inflation, and for 2019 the amounts will be $24,400 Married Filing Jointly, $12,200 Single (and Married Filing Separately), and $18,350 Head of Household.

These changes will all affect the federal tax return. My last article in the October 2019 edition of LocalTies discussed changes made by Minnesota to “conform” to the changes made by the TCJA. The bill (H.F.5) will arguably have a greater effect on Minnesota taxpayers for 2019 than the changes listed here.