The Rules Are Changing: What You Need to Know for 2019

By: Scott Thoma, CFA, CFP®, Principal February 13, 2019

As you begin working on your taxes for 2018, next year’s returns may be far from your mind. But what you do this year could impact your bottom line on next year’s tax form. Here’s a quick look at some changes taking effect this year.

Social Security

  • COLA – This year’s 2.8% cost-of-living adjustment, or COLA, is the highest since 2012.
  • Full retirement age – For those born in 1957 and first becoming eligible for Social Security, full retirement age is age 66 and 6 months. It continues to rise each year by two months until it reaches age 67 for everyone born in 1960 or later.
  • Earnings – If you’re younger than your full retirement age and receiving Social Security, you can now earn up to $17,640 a year before your benefits begin to be reduced. In the year you reach your full retirement age, you can earn up to $46,920. Once you pass your full retirement age, there’s no reduction based on your earnings, although your benefits could still be taxed depending on your income. If you’re not yet receiving benefits, your maximum taxable earnings on which Social Security taxes are deducted rises to $132,900 in 2019. 

Medicare

  • Part B premiums – These are rising modestly in 2019, to $135.50 a month from $134 a month. This only tells part of the story, however, as both Medicare Part B and D premiums are tiered based on your income, specifically your modified adjusted gross income, or MAGI. If your MAGI is over $85,000 and you’re filing single or $170,000 and filing jointly, you’ll pay higher premiums, referred to as an Income Related Monthly Adjustment Amount, or IRMAA. Importantly, these income tiers are not adjusted for inflation, and in fact the income levels for these tiers have been falling in recent years, meaning more and more individuals may be paying an IRMAA. If you received a notice that you are in a higher income tier, it may make sense to talk to your tax professional to see if you may have flexibility in your income, such as using Roth accounts, Health Savings Accounts or Qualified Charitable Distributions, to reduce your MAGI and potentially not be affected by these income tiers.
  • Medicare resources – The government is refreshing its resources. Both the annual handbook and the online Medicare Plan Finder tool should be more intuitive and easier to use.

Income Taxes for 2019

  • Standard deduction – If you’re married and filing jointly for 2019, the deduction rises by $400 to $24,400. If you’re single or married filing separately, it rises by $200 to $12,200. For heads of households, the standard deduction rises by $350 to $18,350. Importantly, since the standard deduction has continued to rise, it may make sense to adjust how you do certain items from year to year, such as charitable giving, if you want to itemize your deductions.
  • Tax brackets – These have risen as well. For the latest information or to find your tax bracket for 2019, visit irs.gov.
  • IRA contributions – You can put in $500 more this year to a traditional or Roth IRA. The contribution limit is now $6,000, or $7,000 if you’re age 50 or older. If you’ve set up systematic contributions to an IRA, you may want to talk to your financial advisor about adjusting the amounts to be sure you’re contributing the maximum amount in 2019.

Other Tax Law Changes

  • Itemized deductions – The 2017 Tax Cuts and Jobs Act changed the rules on these. You’ll want to check with your tax professional on these. This tax law also suspended the personal exemption.
  • Gift and estate tax exclusion – While the gift tax exclusion is staying the same at $15,000, the estate tax exclusion has risen to $11.4 million, up from almost $11.2 million in 2018.

Talk to your tax professional in addition to your financial advisor, or a Social Security or Medicare representative if you have specific questions about Social Security or Medicare. That way you can be sure you’re taking advantage of any benefits these changes might bring you.

Important Information:

Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. This content should not be depended upon for other than broadly informational purposes. Specific questions should be referred to a qualified tax professional.

This information is for educational and illustrative purposes only and should not be interpreted as specific investment advice. Investors should make investment decisions based on their unique investment objectives and financial situation.

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