There are some significant changes to the tax law for 2019.
Starting in 2019, medical expenses (health insurance and out of pocket medical expenses) must exceed 10% of Adjusted Gross Income (AGI) to be deductible. This is up from 7.5% from 2018. Please note that California has not adopted this change.
Affordable Care Act Tax Penalty
Beginning in 2019, you will no longer be penalized for not being covered for health insurance. Please note that the Premium Tax Credit is still available for those seeking health insurance with lower income.
Beginning January 1, 2019, Alimony payments are no longer deductible. Alimony payments received beginning in 2019 will no longer be taxable as income. This change does not effect prior year returns. Please note that California has not adopted this change.
Child and Dependent Care Credits
Beginning in 2018 and carrying on to 2019, the IRS grants a tax credit for dependent children of $2,000. This is up from $1,000. Also, for other dependents, a tax credit of $500 is available.
Early Distributions from Retirement Plans
The IRS has liberalized early distributions from retirement plans. In most cases (taking a distribution before age 59 1/2) these are subject to a 10% penalty. Beginning in 2019 the IRS has added exceptions to the 10% penalty for hardship including: medical expenses, preventing eviction or foreclosure, tuition for higher education expenses, purchasing a home, paying the funeral expenses for a family member, or losses due to federally declared disasters. California has not conformed to this Federal tax law change.
If you need advice on a solid tax strategy, please call Anthony W. Imbimbo for a complimentary consultation. Anthony W. Imbimbo, CPA is a tax expert with over 35 years’ experience. Call him today at 619-497-1040.