Dear Friends:

Hope all is well with you and I wish you all the best for the new decade to come. This is year two of the tax changes from the Tax Cuts and Jobs Act of 2018. Here are key changes to be aware of:

• Family tax credits: The bill doubles the child tax credit from $1,000 to $2,000, $1,400 of which will be refundable. It also provides a $500 credit for other dependents.
• Standard deduction and personal exemptions: For 2019 the standard deduction is $12,200 for single status, $18,350 for head of household, and $24,400 married filing jointly.
• Mortgage interest deduction: Mortgage interest deduction for newly purchased homes (and second homes) is lowered from total loan balances of $1 million under current law to $750,000. Interest from home equity loans (aka second mortgages) will no longer be deductible, unless the money was used for home improvements.
• State, local, sales, and property tax deduction: The deduction for state and local income tax, sales tax, and property taxes ("SALT deduction") will be capped at $10,000.
• Healthcare deductions and credits: The bill repeals the individual mandate of the Affordable Care Act starting in 2019. Unreimbursed medical expenses paid in 2019 have to exceed 10% of your adjusted gross income.
• Job related moving expense: No longer deductible except some military moves.
• Alimony deduction: Alimony paid to an ex-spouse will no longer be deductible by the payor and will no longer be included in the recipient's gross income. This provision is effective for divorce and separation agreements signed after December 31, 2018.
• Miscellaneous Itemized deductions: Subject to the 2% limitations have been eliminated.
• IRA and Retirement Limits: New limits for IRA contributions are $6,000 per year plus $1,000 if you are 50 or older. $19,000 for 401(k) with a catch up provision of $6,000 for 50 or older.
• 2020 Form W-4: A new redesigned W-4 no longer uses withholding allowances but instead there is a five-step process and a new Publication 15-T (Federal Income Tax Withholding Methods) for determining employee withholding.
• California health insurance in 2020: The individual mandate tax penalty will be reinstated which means Californians who choose not to buy qualified health insurance, will face a penalty of either $695 per adult ($347.50 per child) or 2.5% of their annual income.

I find each year that everyone has their own worksheets for gathering tax information. If you would like an organizer please e-mail us at office@jimhodges.us and we will be happy to email you a PDF of the organizer; if preferred we can US mail you a hardcopy. Please call early for your desired appointment as we do get completely booked up.