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The federal standard deduction for:

• Married filing a joint return has increased from $24,000 to $24,400.

• Head of Household has increased from $18,000 to $18,350.

• Single from $12,000 to $12,200.

• Married filing separately from $12,000 to $12,200.

Those who have itemized in the past may still have to keep track of deductions for the State of California.

Dependent deductions are replaced with credits. Although the deduction for exemptions is repealed, the definition of a dependent is not changed. So, for example, eligibility for the Child Tax Credit hinges on whether the taxpayer may claim a qualifying child as a credit. A taxpayer who can claim a "qualifying child" as a dependent is eligible for a $2,000 Child Tax Credit. A taxpayer who can claim a "qualifying relative" as a dependent is eligible for a new $500 tax credit.

Medical Expenses

For 2019, in order to deduct medical costs and health insurance as an itemized deduction, your medical expenses must exceed 10 percent of your adjusted gross income. If you think your 2019 medical expenses exceed this threshold, take the time to assemble and add up your medical costs. If you are sure your medical expenses are below the percentage of income levels, there will be no benefit in adding up your medical expenses. If you are self-employed, the tax preparer will need to know the amount you paid for medical insurance, since you can deduct those expenses even if they are below the percentage of income limits.

Penalty of not having health insurance

The penalty does not apply for the 2019 tax year for not having health insurance. This means taxpayers without health insurance will not continue to be subject to the $695 penalty. Beginning in the year 2020 California will reinstate a penalty for no health insurance. Tax preparers are still required to report all health coverage information on the individual 2019 tax return.

Taxes

Taxpayers may claim an itemized deduction of up to $10,000 ($5,000 in the case of taxpayers filing separately) for the aggregate of state and local income taxes and property taxes. As before, a taxpayer may make an election to deduct sales tax and use tax (also limited to the $10,000 limit). State and local taxes and property taxes paid in carrying on a trade or business and rental activity remain fully deductible.

Mortgage Interest

If you are paying mortgage interest you will receive a Form 1098 which states the interest you have paid on your mortgage in 2019. Please furnish the tax preparer with that information, as the IRS is checking the deductions you claim with their records. If you refinanced your mortgage, furnish the tax preparer with the refinancing closing statements.

Charitable Donations

As in all prior years, all charitable donations reported on your tax return must have receipts to substantiate the deduction. If you made a donation over $250 you must have a properly dated letter from that charity acknowledging the donation, which clearly states that no goods or services were received in return for the contribution.

Miscellaneous itemized deductions

All miscellaneous deductions that were subject to the two percent floor are repealed.

2019 Standard Mileage Rates

• Business 58.0 cents per mile

• Charitable 14.0 cents per mile

• Depreciation 26.0 cents per mile

• Medical and moving 20.0 cents per mile

The office of Moats & Hebebrand CPAs makes a concerted effort to stay on top of the changes in the tax laws so you don't have to. Let us prepare your 2019 tax returns so you know they are done right! We are also open all year to assist with tax planning and to take care of our clients.