2019 - Linkenheimer LLP CPAs & Advisors

Many Tax-Related Limits Affecting Businesses Increase for 2019

A variety of tax-related limits affecting businesses are annually indexed for inflation, and many have gone up for 2019. Here’s a look at some that may affect you and your business.

Deductions

Section 179 expensing:
- Limit: $1.02 million (up from $1 million)
- Phaseout: $2.55 million (up from $2.5 million)
Income-based phase-ins for certain limits on the Sec. 199A qualified business income deduction:
- Married filing jointly: $321,400-$421,400 (up from $315,000-$415,000)
- Married filing separately: $160,725-$210,725 (up from $157,500-$207,500)
- Other filers: $160,700-$210,700 (up from $157,500-$207,500)

Retirement plans

Employee contributions to 401(k) plans: $19,000 (up from $18,500)
Catch-up contributions to 401(k) plans: $6,000 (no change)
Employee contributions to SIMPLEs: $13,000 (up from $12,500)
Catch-up contributions to SIMPLEs: $3,000 (no change)
Combined employer/employee contributions to defined contribution plans (not including catch-ups): $56,000 (up from $55,000)
Maximum compensation used to determine contributions: $280,000 (up from $275,000)
Annual benefit for defined benefit plans: $225,000 (up from $220,000)
Compensation defining “highly compensated employee”: $125,000 (up from $120,000)
Compensation defining “key employee”: $180,000 (up from $175,000)

Other employee benefits

Qualified transportation fringe-benefits employee income exclusion: $265 per month (up from $260)
Health Savings Account contributions:
- Individual coverage: $3,500 (up from $3,450)
- Family coverage: $7,000 (up from $6,900)
- Catch-up contribution: $1,000 (no change)
Flexible Spending Account contributions:
- Health care: $2,700 (up from $2,650)
- Dependent care: $5,000 (no change)

Additional rules apply to these […]

By Linkenheimer LLP|2019-01-22T18:19:45+00:00January 22nd, 2019|business, deduction, deductions, retirement, tax planning|0 Comments

What Will Your Marginal Income Tax Rate Be?

While the Tax Cuts and Jobs Act (TCJA) generally reduced individual tax rates for 2018 through 2025, some taxpayers could see their taxes go up due to reductions or eliminations of certain tax breaks — and, in some cases, due to their filing status. But some may see additional tax savings due to their filing status.

Unmarried vs. married taxpayers

In an effort to further eliminate the marriage “penalty,” the TCJA made changes to some of the middle tax brackets. As a result, some single and head of household filers could be pushed into higher tax brackets more quickly than pre-TCJA. For example, the beginning of the 32% bracket for singles for 2018 is $157,501, whereas it was $191,651 for 2017 (though the rate was 33%). For heads of households, the beginning of this bracket has decreased even more significantly, to $157,501 for 2018 from $212,501 for 2017.

Married taxpayers, on the other hand, won’t be pushed into some middle brackets […]

By Linkenheimer LLP|2019-01-18T18:58:22+00:00January 18th, 2019|New Tax Laws, tax rate, taxpayer|0 Comments

2 Major Tax Law Changes for Individuals in 2019

While most provisions of the Tax Cuts and Jobs Act (TCJA) went into effect in 2018 and either apply through 2025 or are permanent, there are two major changes under the act for 2019. Here’s a closer look.

1. Medical expense deduction threshold

With rising health care costs, claiming whatever tax breaks related to health care that you can is more important than ever. But there’s a threshold for deducting medical expenses that was already difficult for many taxpayers to meet, and it may be even harder to meet this year.

The TCJA temporarily reduced the threshold from 10% of adjusted gross income (AGI) to 7.5% of AGI. Unfortunately, the reduction applies only to 2017 and 2018. So for 2019, the threshold returns to 10% — unless legislation is signed into law extending the 7.5% threshold. Only qualified, unreimbursed expenses exceeding the threshold can be deducted.

Also, keep in mind that you have to itemize deductions […]

By Linkenheimer LLP|2019-01-08T22:13:03+00:00January 8th, 2019|medical deduction, New Tax Laws|0 Comments

Is There Still Time to Pay 2018 Bonuses and Deduct Them On Your 2018 Return?

There aren’t too many things businesses can do after a year ends to reduce tax liability for that year. However, you might be able to pay employee bonuses for 2018 in 2019 and still deduct them on your 2018 tax return. In certain circumstances, businesses can deduct bonuses employees have earned during a tax year if the bonuses are paid within 2½ months after the end of that year (by March 15 for a calendar-year company).

Basic requirements

First, only accrual-basis taxpayers can take advantage of the 2½ month rule. Cash-basis taxpayers must deduct bonuses in the year they’re paid, regardless of when they’re earned.

Second, even for accrual-basis taxpayers, the 2½ month rule isn’t automatic. The bonuses can be deducted on the tax return for the year they’re earned only if the business’s bonus liability was fixed by the end of the year.

Passing the test

For accrual-basis taxpayers, a liability (such as a bonus) is deductible when it is incurred. To determine this, the IRS applies the “all-events test.” Under this test, a liability is incurred when:

All events have occurred that establish the taxpayer’s liability,
The amount of the liability can be determined with reasonable accuracy, and
Economic performance […]

By Linkenheimer LLP|2020-09-03T20:04:21+00:00January 8th, 2019|bonus, deduction, employer, tax, tax deadlines|0 Comments

A Review of Significant TCJA Provisions Impacting Individual Taxpayers

Now that 2019 has begun, there isn’t too much you can do to reduce your 2018 income tax liability. But it’s smart to begin preparing for filing your 2018 return. Because the Tax Cuts and Jobs Act (TCJA), which was signed into law at the end of 2017, likely will have a major impact on your 2018 taxes, it’s a good time to review the most significant provisions impacting individual taxpayers.

Rates and exemptions

Generally, taxpayers will be subject to lower tax rates for 2018. But a couple of rates stay the same, and changes to some of the brackets for certain types of filers (individuals and heads of households) could cause them to be subject to higher rates. Some exemptions are eliminated, while others increase. Here are some of the specific changes:

Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37%
Elimination of personal and dependent exemptions
AMT exemption increase, to $109,400 for joint filers, $70,300 for singles and heads of households, and $54,700 for separate filers for 2018
Approximate doubling of the gift and estate tax exemption, to $11.18 million for […]

By Linkenheimer LLP|2020-09-03T20:04:21+00:00January 3rd, 2019|credit, deduction, deductions, New Tax Laws, tax rate|0 Comments