6 Tax Changes To Know To Avoid A Surprise In 2019

#1 Estate Tax Changes

For high-net-worth individuals looking to make estate-planning decisions, a temporary change in the tax code doubled the inheritance tax exemption to $11.18 million for 2018, up from an expected amount of $5.6 million. Married couples can combine exemptions to have $22.36 million in exemptions. This increased exemption is scheduled to fall back to $5.6 million in 2026.

#2 Business Income

Business owners, even people who just have side gigs, may benefit from tax code changes, depending on how much they make. People who have either a sole proprietorship, a limited-liability corporation, partnership or an S-corporation have more opportunities to deduct expenses, Henley says.

#3 Child Care Credits

The tax code temporary removed the $4,050 personal exemption for years 2018 to 2025. Even so, Steffen says people should still be identifying those dependents because the child tax credit was raised to $2,000 from $1,000 for children under age 17. A separate $500 credit is available for dependents who don’t qualify for the $2,000 credit.

#4 Alimony Payments

For people who are in the process of getting a divorce, 2018 is the last year that alimony payments can be deducted from their taxes, experts say. Divorces granted in December 2018 will be grandfathered into the new law. But starting in January 2019, any new or modified divorces are no longer a tax write-off.

#5 Charitable And Medical Deductions

Gifts to charity can be deducted – if a taxpayer itemizes – to reduce a tax burden. Stephen Henley, national tax practice leader at CBIZ MHM in Atlanta, says for taxpayers who are nearing the standard deduction threshold, charitable deductions could push them over the edge to allow itemization.

#6 Tax Rate Changes

Most tax brackets for adjusted gross income, the amount earned after deductions, were lowered. Tim Steffen, director of advanced planning for Baird in Milwaukee, says while the marginal tax rate is lower, taxable income for most people will increase because of fewer tax deductions.