The Payroll Blog

News, tips, and advice for small business owners

Tax Changes to Expect in 2019 (Part 1)

Posted On
12/10/2018
By
Stephanie Davis

With just a few weeks until 2019, it’s important to get prepared for the new year. Even though it’s only December, it’s never too early to start thinking about tax season. If you’re wondering what you should know and the proposed tax brackets and numbers for 2019, we’ve got you covered.

Cost-of-living Adjustments

In July and August, the consumer price index (CPI) increased .2%, and in September it increased .1%. The CPI measures the cost of goods and services, which equals your cost of living. Typically, when CPI doesn’t change much, it’s expected that interest rates will pretty much remain the same. However, for 2019, the IRS is making a change to figure out cost-of-living adjustments. Under the Tax Cuts and Jobs Act (TCJA), the “normal” CPI has been replaced with a “chained” CPI. This means that a chained response will measure how consumers respond to the higher prices compared to just measuring the higher prices. For taxpayers, this means that inflation adjustments will appear smaller. All of this is important to be aware of because inflation and cost-of-living adjustments are typically seen in tax legislation and why you will likely see changes every year in terms of deductions.

To start preparing for tax season, these are some projected numbers (not actual). The below tables came from information originally found in this Forbes article

 

Individual Tax Payers

If Taxable Income is Between: The Tax Due Is:
   
0 - $9,700 10% of taxable income
$9,701 - $39,475 $970 + 12% of the amount over $9,700
$39,476 - $84,200 $4,543 + 22% of the amount over $39,475
$84,201 - $160,725 $14,382.50 + 24% of the amount over $84,200
$160,726 - $204,100 $32,748.50 + 32% of the amount over $160,725
$204,101 - $510,300 $46,628.50 + 35% of the amount over $204,100
$510,301 + $153,798.50 + 37% of the amount over $510,300

 

Married Individuals Filing Joint Returns and Surviving Spouses

If Taxable Income is Between: The Tax Due Is:
   
0 - $19,400 10% of taxable income
$19,401 - $78,950 $1,940 + 12% of the amount over $19,400
$78,951 - $168,400 $9,086 + 22% of the amount over $78,950
$168,401 - $321,450 $28,765 + 24% of the amount over $168,400
$321,451 - $408,200 $65,497 + 32% of the amount over $321,400
$408,201 - $612,350 $93,257 + 35% of the amount over $408,200
$612,351 + $164,709.50 + 37% of the amount over $612,350

 

Married Filing Separately

If Taxable Income is Between: The Tax Due Is:
   
$0 - $9,700 10% of taxable income
$9,701 - $39,475 $970 + 12% of the amount over $9,700
$39,476 - $84,200 $4,543 + 22% of the amount over $39,475
$84,201 - $160,725 $14,382.50 + 24% of the amount over $84,200
$160,726 - $204,100 $32,748.50 + 32% of the amount over $160,725
$204,101 - $306,175 $46,628.50 + 35% of the amount over $204,100
$306,176+ $82,354.75 + 37% of the amount over $306,175

 

Heads of Household

If Taxable Income is Between: The Tax Due Is:
   
$0 - $13,850 10% of taxable income
$13,851 - $52,850 $1,385 + 12% of the amount over $13,850
$52,851 - $84,200 $6,065 + 22% of the amount over $52,850
$84,201 - $160,700 $12,962 + 24% of the amount over $84,200
$160,701 - $204,100 $31,322 + 32% of the amount over $160,700
$204,001 - $510,300 $45,210 + 35% of the amount over $204,100
$510,301+ $152,380 + 37% of the amount over $510,300

 

Trust & Estates

If Taxable Income is Between: The Tax Due Is:
   
$0 - $2,600 10% of taxable income
$2,601 - $9,300 $260 + 24% of the amount over $2,600
$9,301 - $12,750 $1,868 + 35% of the amount over $9,300
$12,751+ $3,075.50 + 37% of the amount over $12,750

 

Capital Gains

Capital gains rates will not change for 2019. However, the break points for the rates will change. Bloomberg Tax anticipates that the maximum zero rate amounts and maximum 15% rate amounts will break down as follows:

Filing Status Maximum Zero Amount Maximum 15% Rate Amount
     
Single $39,350 $434,550
Married Filing Jointly & Surviving Spouse $78,750 $488,850
Married Filing Separately $39,350 $244,400
Head of Household $52,750 $461,700
Trusts & Estates $2,650 $12,950

 

Filing Status Maximum Zero Amount Maximum 15% Rate Amount
     
Married Filing Jointly $321,450 $421,450
Married Filing Separately $160,725 $210,725
All Other Taxpayers $39,350 $210,700

 

Alternative Minimum Tax (AMT) Exemptions

Filing Status Exemption Amount:
   
Individual $71,700
Married Filing Jointly & Surviving Spouse $111,700
Married Filing Separately $55,850
Trusts & Estates $25,000

 

Filing Status Standard Deduction Amount
   
Single $12,200
Married Filing Jointly & Surviving Spouse $24,400
Married Filing Separately $12,200
Head of Household $18,350

 

Next Steps

Tax season can be tricky to manage, especially when things could change from the previous year. The best thing you can do is research and stay up to date as much as possible or hire a tax professional to help you out. We want you to be prepared too, so be sure to check in with us December 19th to see what else is in store for 2019.