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2019 Inflation Adjustment Amounts Released By IRS

The IRS has released the new inflation-adjusted amounts for 2019. Read more.

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Insights  <  2019 Inflation Adjustment Amounts Released By IRS

The IRS has released the new inflation-adjusted amounts for 2019. Read more.

The IRS has released new inflation-adjusted amounts for 2019, which generally apply to tax years beginning in 2019 or transactions or events occurring in calendar year 2019. Included are the tax rate tables, the beginning income levels for the limitation on certain itemized deductions, and the beginning income levels for the phase-out of personal exemptions and credits.

The inflation-adjusted amounts include the following:

Kiddie Tax

For purposes of determining whether a child’s unearned income is taxed at the higher trust tax rates, the amount by which the child’s net unearned income for 2019 is $1,100.

Maximum Capital Gains Rate

For tax years beginning in 2019, the maximum zero rate amount is $78,750 in the case of a joint return or surviving spouse, $52,750 in the case of an individual who is a head of household, $39,375 in the case of any other individual (other than an estate or trust), and $2,650 in the case of an estate or trust.

Adoption Credit

The adoption credit is $14,080, and begins phasing out for taxpayers with modified adjusted gross income in excess of $211,160; it is completely phased out for taxpayers with modified adjusted gross income of $251,160 or more.

Child Tax Credit

The value used to determine the amount of child tax credit under Code Sec. 24 that may be refundable is $1,400.

Education Tax Credits

The Hope Scholarship Credit is 100 percent of qualified tuition and related expenses of up to $2,000, plus 25% of excess expenses not above $4,000. Thus, the maximum Hope Scholarship Credit allowable is $2,500.

Earned Income Tax Credit

In 2019, the maximum EITC is $6,557 for taxpayers with three or more qualifying children, $5,828 for taxpayers with two qualifying children, $3,526 for taxpayers with one qualifying child, and $529 for taxpayers with no qualifying children. The credit amount begins to phase out at an income level of $19,030 ($8,650 for taxpayers with no qualifying children).

Refundable Credit for Coverage Under a Qualified Health Plan

For tax years beginning in 2019, the limitation on tax imposed for excess advance credit payments is determined as follows: If household income (expressed as a percent of the poverty line) is less than 200 percent, the limitation amount for unmarried individuals is $300. The limit for married individuals, surviving spouses and heads of household is $600. If household income is 200 percent but less than 300 percent, the limit for unmarried individuals is $800 and for all other taxpayers is $1,600. If household income is 300 percent but less than 400 percent, the limit for unmarried individuals is $1,325 and for all other taxpayers is $2,650.

Low-Income Housing Credit

The amount used to calculate the 2019 state housing credit ceiling for the low-income housing credit is the greater of $2.75625 multiplied by the state population or $3,166,875.

Employee Health Insurance Expense of Small Employers

For calendar year 2019, the dollar amount in effect is $27,100.

Alternative Minimum Tax

The AMT exemption amounts are: $71,700 (single, head of household), $55,850 (married filing separately), $111,700 (married filing jointly, surviving spouses) and $25,000 (estates, trusts).

Standard Deduction

The standard deduction amounts for 2019 are $24,400 (married filing jointly, surviving spouses), $18,350 (head of household), and $12,200 (unmarried and married filing separately).

Cafeteria Plans

The dollar limitation on voluntary employee salary reductions for contributions to health flexible spending arrangements is $2,700.

Transportation Fringe Benefit

The monthly limitation regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $265.

Savings Bond Education Exclusion

The exclusion for taxpayers who pay qualified higher education expenses begins to phase out for modified adjusted gross income (MAGI) above $121,600 for joint returns and $81,100 for other returns. The exclusion phases out completely at MAGI levels of $151,600 for joint returns and $96,100 for other returns.

Personal Exemption

The personal exemption amount is zero for tax years beginning after
December 31, 2017, and before January 1, 2026.

Code Sec. 179 Property

For tax years beginning in 2019, the aggregate cost of any Code Sec. 179 property that a taxpayer elects to treat as an expense cannot exceed $1,020,000.

Qualified Business Income

For tax years beginning in 2019, the threshold amount is $321,400 for married filing joint returns, $160,725 for married filing separate returns, and $160,700 for single and head of household returns.

Long-term Care Premiums

The limitations regarding eligible long-term care premiums includible in the term “medical care” are $420 (attained age of 40 or less before close of tax year), $790 (41-50), $1,580 (51-60), $4,220 (61-70) and $5,270 (over 70).

Medical Savings Accounts

For tax years beginning in 2019, the term “high deductible health plan” means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,350 and not more than $3,500, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,650. For family coverage, the term means a health plan that has an annual deductible that is not less than $4,650 and not more than $7,000, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,550.

Interest on Education Loans

The $2,500 maximum deduction for interest paid on qualified education loans begins to phase out for taxpayers with modified adjusted gross income in excess of $70,000 ($140,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $80,000 or more ($165,000 or more for joint returns).

Limitation on Use of Cash Method of Accounting

For tax years beginning in 2019, a corporation or partnership meets the gross receipts test for any tax year if the entity’s average annual gross receipts for the 3-tax-year period ending with the tax year which precedes such tax year does not exceed $26 million.

Threshold for Excess Business Loss

For tax years beginning in 2019, in determining a taxpayer’s excess business loss, the amount is $255,000 ($510,000 for joint returns).

Insurance Companies Other Than Life Insurance Companies

For tax years beginning in 2019, the limit on net written premiums or direct written premiums, whichever is greater, is $2,300,000 to elect the alternative tax for certain small companies to be taxed only on taxable investment income.

Tax Responsibilities of Expatriation

For tax years beginning in 2019, the amount that would be includible in the gross income of a covered expatriate is reduced (but not below zero) by $713,000.

Foreign Earned Income Exclusion

The foreign earned income exclusion amount is $105,900.

Debt Instruments Arising Out of Sales or Exchanges

For calendar year 2019, a qualified debt instrument has stated principal that does not exceed $5,944,600, and a cash method debt instrument under Code Sec. 1274A(c)(2) has stated principal that does not exceed $4,246,200.

Unified Credit Against Estate Tax

For an estate of any decedent dying in calendar year 2019, the basic exclusion amount is $5,600,000 for determining the amount of the unified credit against estate tax under Code Sec. 2010.

Gross Estate Valuation of Real Property

For an estate of a decedent dying in calendar year 2019, if the executor elects to use the special use valuation method for qualified real property, the aggregate decrease in the value of qualified real property cannot exceed $1,160,000.

Estate and Gift Taxes

The annual gift tax exclusion from the total amount of taxable gifts made remains $15,000.

Reporting Exception for Certain Exempt Organizations with Nondeductible Lobbying Expenditures

For tax years beginning in 2019, the annual per person, family or entity dues limitation to qualify for the reporting exception regarding certain exempt organizations with nondeductible lobbying expenditures, is $117 or less.

Notice of Large Gifts from Foreign Persons

Code Sec. 6039F authorizes the Treasury Department and the IRS to require recipients of gifts from certain foreign persons to report the gifts when the aggregate value of gifts received in the tax year exceeds $16,388.

Failure-to-file Penalty

If a return is not timely filed or if the tax owed by the taxpayer is not timely paid, a penalty is imposed unless the taxpayer shows that the delay resulted from a reasonable cause rather than willful neglect. For returns required to be filed in 2020, the amount of the additional tax that is imposed for failure to file a tax return within 60 days of the due date of that return is not less than the lesser of $215 or 100 percent of the amount required to shown as tax on that return.

Penalty for Failure to File Information Returns

For returns required to be filed in 2020, the IRS has provided inflation-adjusted penalty amounts for failure to file information returns by certain trusts and exempt organizations. This includes (1) failure to file a return required under Code Sec. 6033(a)(1), relating to returns by exempt organizations, or Code Sec. 6012(a)(6), relating to returns by political organizations; (2) failure to file a return required under Code Sec. 6034, relating to returns by certain trust, or Code Sec. 6043(b), relating to terminations, etc., of exempt organizations; and (3) failure to file a disclosure required under Code Sec. 6033(a)(2). The amount of the penalty, as adjusted for inflation, depends on the type of entity and the nature of the failure to file.

Tax Return Preparer Penalties

For any failure relating to a return or claim for refund required to be filed in 2020, the penalty amounts vary according to the specific type of failure involved, including failure to furnish a copy to the taxpayer, failure to sign the return, failure to furnish an identifying number, failure to retain a copy or list, or failure to file correct information returns (for all of the foregoing, $50 per return or refund claim, with a maximum penalty of $26,500).

Penalty for Failure to File Partnership Return

Under Code Sec. 6698, a penalty may be imposed against a partnership that is required to file a partnership return but fails to timely do so or files a return that does not include all the necessary information. For returns required to be filed in 2020, the dollar amount used to determine the monthly amount of the penalty is $205.

Penalty for Failure to File S Corporation Return

S corporations that fail to meet their information filing obligations face a penalty imposed at the entity level. For returns required to be filed in 2020, the dollar amount is $205.

Penalty for Failure to File Correct Information Return

The IRS has provided inflation adjustments for certain civil penalties for returns and statements required to be filed in 2020. The penalty amounts for failure to file correct information returns are: (1) for persons with average gross receipts of more than $5,000,000, the penalty for failure to file correct payee statements is generally $270 (maximum $$3,339,000). However, it is $50 (maximum $556,500) per return if corrected on or before 30 days after the required filing date; $110 (maximum $1,669,500) if corrected after the 30th day but on or before August 1; and (2) for persons with average gross receipts of $5,000,000 or less, the penalties per return are the same but the maximum penalty decreases to $1,113,000, $194,500 and $556,500 respectively.

Penalty for Failure to Furnish Correct Payee Statement

For any failure relating to a statement required to be furnished in 2020, the inflation-adjusted penalty amounts include penalties for failure to furnish payee statements by (1) persons with average annual gross receipts for the three most recent tax years of more than $5,000,000; (2) persons with average annual gross receipts for the three most recent tax years of $5,000,000 or less; and (3) persons whose failure to file correct statements was due to intentional disregard of the requirement to furnish a payee statement, or the correct information reporting requirement.

Qualified Small Employer Health Reimbursement Arrangement

For tax years beginning in 2019, to qualify as a qualified small employer health reimbursement arrangement under Code Sec. 9831(d), the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $5,150 ($10,450 for family coverage).

These inflation-adjusted figures generally apply to tax years beginning in 2019, except for certain specified figures that apply to transactions or events occurring in calendar year 2019.

Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statutes, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.

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