February 16, 2019
Dear Clients & Friends:
Here it is the middle of February and tax season is in full swing. We are meeting with our business clients to get started on corporate returns and many of our individual clients have received and are bringing their information in. In January, we mailed organizers to our individual clients. If you did not receive one but would like to, please call our office today.
Enclosed, please find our quarterly newsletter. The spring edition, released during tax season, contains quite a bit of beneficial information. The newsletter has a new look. The company we used to get our newsletter from was bought out and this is the new offering we have selected.
As you know, the tax year 2018 is a year of change. The Tax Cuts and Jobs Act of 2017 signed into law on December 22, 2017 goes fully into effect for this tax year. The main focus of the new law was to reduce corporate tax rates from a high of 38% to a flat 21%. For individual taxpayers, tax rates declined on average by 4%. The biggest impact for individuals is what is deductible. The standard deduction basically doubled. It is $24,000 for married individuals and $12,000 for singles. The increase is offset by a loss of personal exemptions. Each exemption was worth $4,100, now the deduction is zero. For taxpayers that itemize, there are major changes. The deduction for state and local taxes is now limited to $10,000. Interest on Home Equity loans is no longer deductible and deductions for employee business and investment expenses has been eliminated. With all the changes to itemized deductions, many taxpayers will use the standard deduction at the federal level but will continue to itemize on the state level because the state did not increase its standard deduction.
After you digest the new laws’ effect on your 2018 return, we will talk about what to do in 2019 to take full advantage of the new laws’ provisions. Our newsletter contains information and ideas to help you manage your 2019 tax obligation. The 2019 retirement plan contribution limits have increased, so you may want to increase your pension withholding. These changes are detailed on the enclosed newsletter.
Did you know that the portion of the Affordable Care Act that requires you to have health insurance or pay a penalty will be suspended beginning with the 2019 tax year? You can still purchase insurance on the exchange and many taxpayers qualify for subsidies to pay part of the premium.
Additionally, if you pay alimony, beginning in 2019, it is no longer a tax deduction for those paying it. It will also no longer be income for those receiving it. This change only effects new divorce agreements.
Also, the standard mileage rate increased from 54.5 cents to 58 cents for 2019 for every business mile driven, 20 cents per mile for medical and moving miles and 14 cents per mile for miles driven in service of a charitable organization.
Please call our office for an appointment as soon as you receive all of your tax information. We try to use the first-in, first-out method when preparing returns, so the sooner you bring in all your information, the sooner we will be able to prepare your return and get it back to you. We are looking forward to meeting with you in the coming weeks and assisting you with your financial and tax preparation needs.
Thank you for your continued patronage. As always, we welcome any feedback you may have on the services we offer and we also welcome any referrals you may have.
Starkey & Company, PA