As the New Year starts, it is quite normal to start thinking about your taxes – filing your 2018 return as well as your tax picture for 2019. The IRS recently released the 2019 tax figures adjusted for inflation. Just to be clear, these are not the figures that you will see on your return for this upcoming tax season. Here are some highlights of the inflation adjusted numbers.
- The standard deduction will increase to $24,400 for married filing joint, $12,200 for single taxpayers and $18,350 for those filing as head of household.
- The lowest tax bracket will be in effect up to $19,400 for married filling joint and $9,700 for single filers.
- The top tax bracket will kick in at $612,350 for married filing joint and $510,300 for single filers.
- The maximum Earned Income Credit will be $6,557 for married filling joint with three or more qualifying children.
- The annual gift exclusion will be $15,000 (no increase from 2018).
- The penalty for not maintaining minimum essential health coverage will be $0.
An interesting tidbit to point out is that as part of the Tax Cuts and Jobs Act (TCJA), the method to adjust tax figures for inflation was changed. Previously, the Consumer Price Index was used; however, under TCJA, this was changed to what is called the Chained Consumer Price Index. Without getting into too many details, the Chained Consumer Price Index results in a smaller adjustment year to year.
You can see the full details of these adjustments here.