The IRS has announced its updates to income tax brackets for 2019, reflecting slightly higher limits to this year’s tax brackets to account for inflation. The announcement is merely a slight tweak to the current marginal income tax brackets that were established by Congress. As you may know, personal income taxes changed quite markedly in 2018 due to the tax cut passed by Congress.
The tax cut was a mixed outcome for our clients in 2018. While marginal tax rates were generally lowered and the standard deduction was increased, there were new limits placed upon tax deductions from the old tax code. For example, state and local taxes are now subject to a maximum deduction of $10,000 for married joint filers. On balance, the tax legislation was mildly positive for some, but not all, high net worth families.
While the changes to the tax code in 2019 are modest, they are still favorable to tax payers. The 12% tax bracket went up to $77,400 in 2018. In 2019, the 12% tax bracket will go to $78,950. The bump up is approximately 2%, which is also the approximate rate of inflation over the past year. The increase in tax bracket limits are similar for other brackets as well.
Other positives have emerged from the IRS announcement. When filing taxes, married joint filers will have a standard deduction boost of $400 in 2019. Additionally, there will be increases to retirement account contribution limits. Employees can contribute up to $19,000 towards their 401k’s in 2019. Additionally, the IRA contribution limit has been stepped up from $5,500 to $6,000 in the new year.
You can find out more here from CNBC. Link: https://www.cnbc.com/2018/11/16/here-are-your-new-income-tax-brackets-for-2019.html
Content in this material is for general information only and not intended to provide specific tax advice or recommendations for any individual. We suggest that you discuss your specific tax issues with a qualified tax advisor.