Every year the IRS adjusts for inflation dozens of tax provisions. These include tax rate schedules, tax tables and cost-of-living adjustments.

The IRS announced the adjustments for 2019. These apply to your 2019 taxes. You’ll use these numbers to prepare your 2019 tax returns in 2020.

Here are the most significant adjustments for 2019.

Standard Deduction

Every taxpayer gets a standard deduction—an amount you deduct from your income to determine your taxable income.  The standard deduction will be going up from $200 to $400 for all taxpayers. This will lower your taxes a bit.

If you’re a single taxpayer, the standard deduction rises to $12,200 for 2019, up $200 from 2018. If you’re married and file jointly (as almost all married couples do) the standard deduction rises to $24,400 for 2019, up $400 from 2018. For heads of households, the standard deduction will be $18,350 for the tax year 2019, up $350.

Tax Brackets

The United States has a progressive income tax system for individual taxpayers. The higher your income, the higher your tax rate. The Tax Cuts and Jobs Act (TCJA) established a new set of seven tax rates (called tax brackets) that took effect in 2018. These range from 10 percent of taxable income to 37 percent. You move from one bracket to the next only when your taxable income exceeds the bracket amount.

The seven tax brackets of the TCJA remain in effect for 2018, were adjusted upward to account for inflation. This will save you taxes. The brackets for 2019 and 2018 are shown in the charts below.

You can see, for example, that the lowest 10 percent rate applies to the first $9,525 earned by a single taxpayer in 2018. For 2019, the 10 percent rate applies to the first $9,700—an increase of $175.

For higher-income taxpayers, the savings can be noticeable. As an example, in 2018 a single taxpayer must pay tax at a 32 percent rate on income between $315,000 and $321,450. In 2019, this $6,450 in income is taxed at a much lower 24 percent rate, a savings of $387.

2019 Personal Income Tax Rates

2019 Tax RateIndividual Married, Filed Jointly
10%0 to $9,7000 to $19,400
12%$9,701 to $39,475$19,401 to $78,950
22%$39,476 to $84,200$78,951 to $168,400
24%$84,201 to $160,725$168,401 to $321,450
32%$160,726 to $204,100$321,451 to $408,200
35%$204,101 to $510,300$408,201 to $612,350
37%$510,301 and up$612,351 and up

 

2018 Personal Income Tax Brackets & Rates

Tax RateIndividualsMarried, Filing Jointly
10%Up to $9,525Up to $19,050
12%$9,526 to $38,700$19,051 to $77,400
22%$38,701 to $82,500$77,401 to $165,000
24%$82,501 to $157,500$165,001 to $315,000
32%$157,501 to $200,000$315,001 to $400,000
35%$200,001 to $500,000$400,001 to $600,000
37%over $500,000over $600,000

 

Flexible Spending Arrangements (FSA)

Many employers offer their employees health flexible spending arrangements (FSA). Employees can contribute part of their salary to the FSA and then withdraw the money tax-free to pay for health-related expenses not covered by insurance.

This can include deductibles, copayments, and coinsurance for the employee’s health plan. There is an annual limit of employee contributions to a health FSA.  For 2019, the dollar limitation for employee contributions to health flexible spending arrangements is $2,700, up $50 from the limit for 2018.

Transportation Fringe Benefits

Many employers offer transportation fringe benefits, such as paid parking. Such benefits are tax-free up to a specified monthly amount. For 2019, the monthly limit for the transportation fringe benefit is $265, up from $260 for 2018.

Earned Income Tax Credit

Low-income taxpayers who work can qualify for the earned income tax credit. The amount depends on how much taxpayers earn and how many children they have. For 2019 maximum Earned Income Credit amount is $6,557 for taxpayers filing jointly who have three or more children, up from a total of $6,431 for 2018.

Lifetime Learning Credit

You can qualify for a lifetime learning credit of up to $2,000 to pay for education after high school. The credit is phased out and then eliminated at higher income levels. For a married couple filing jointly, the credit begins to go down if modified adjusted gross income is more than 116,000. This is up from $114,000 for 2018.

Adoption Tax Credit

People who adopt children can get a tax credit to help defray their adoption expenses. For 2019, the maximum adoption credit is $14,080, up from $13,810 for 2018.

Earned Income Exclusion

U.S. citizens who live outside the U.S. need not pay U.S. taxes on a certain amount of the income they earn abroad as employees or self-employed business owners. For 2019 the foreign earned income exclusion is $105,900 up from $103,900 for 2018.

Alternative Minimum Tax

Higher-income taxpayers who take many deductions sometimes become subject to the alternative minimum tax (AMT). This requires taxpayers who would otherwise pay little or no income tax, pay a minimum amount. A certain amount of income is exempt from the AMT. The AMT exemption amount for 2019 is $71,700 for single taxpayers. The 2018 exemption amount was $70,300. For married couples filing jointly the exemption amount is $111,700. It was $109,400 for 2018.

Estate Tax Exclusion Amount

The federal estate tax applies only to estates worth more than a specified amount, called the exclusion amount.  For 2019, the exclusion amount is $11,400,000, up from $11,180,000 for the estates of people who die in 2018.

Stephen Fishman

Stephen Fishman

Stephen Fishman is a self-employed tax expert and regular contributor to MileIQ. He has dedicated his career as an attorney and author to writing useful, authoritative and recognized guides on taxes and business law for entrepreneurs, independent contractors, freelancers and other self-employed people. He is the author of over 20 books and hundreds of articles, and has been quoted in The New York Times, Wall Street Journal, Chicago Tribune, and many other publications. Visit Fishman Law and Tax Files for more information on his work.
Stephen Fishman