2019 Year-end Newsletter
November 19, 2019
Dear Clients and Friends:
We hope you are enjoying the cooler weather of fall and are looking forward to the holidays ahead. With one year behind us of working with the new tax law, we have a better understanding of how the changes will impact your tax situation. Of course, tax law is always evolving so the tax year 2019 will bring its own set of changes.
Some of these changes are highlighted in the enclosed year-end edition of our newsletter. In the newsletter, you will find important information to consider before the end of 2019. For the tax year 2019, the alimony rules have changed. For the recently divorced, alimony is no longer a tax deduction for those paying it, nor is it income for those receiving it. Additionally, the threshold to deduct medical expenses as an itemized deduction has increased from 7.5 percent to 10 percent. The threshold increase means that less of your medical expenses will be deductible. A more positive tax change is that the portion of the Affordable Care Act that requires you to have health insurance or pay a penalty is suspended for now.
Tax planning is always important. The newsletter highlights some important items you should consider to ensure you are not missing something that could affect your tax situation. If you are 70 ½ or older, you will need to take your Required Minimum Distribution before December 31 if you haven’t already. You could face a 50% tax if you neglect to take the RMD before the end of the year. If you are a charitable contributor, you may want to consider making Qualified Charitable Distributions from your IRA to meet all or part of your Required Minimum Distribution. The charity must receive your donation by December 31 in order for you to apply it to your 2019 tax return. There are other last minute tips included in our newsletter that you could utilize to help your tax situation in these last few weeks of the year.
The IRS is giving the Form W-4, Employees Withholding Allowance Certificate, a major overhaul beginning January 1. The previous form estimated your appropriate tax withholding using an allowance system. The new form will no longer use allowances but instead ask you to account for all income, deductions, credits and potential changes to provide a more accurate forecast for your tax withholdings. Please reach out to us if you need any assistance completing the form.
For the first time in six years, contribution limits for retirement savings are increasing. Contribution maximums for 401(k) accounts and IRAs have increased by $500 for 2019. As you are aware, contributing the maximum amount allowable will maximize your tax savings and increase your future earnings potential. If you are 50 or older, remember to take advantage of the additional catch-up contribution amounts available.
In December, we will be attending more seminars to gain a better understanding of the tax law changes that went into effect in 2018. The IRS continues to issue regulations that clarify the new law and it is important for us to keep abreast of these changes so we can assist our clients with the best tax advice.
Please stop by our office to be introduced to our new CPA, Angel Hodges. Angel came on board in August and is excited to help us serve our clients and friends.
The months of November and December are a great time to evaluate your tax situation and review the options you have. If you have any concerns or questions, please don’t hesitate to call our office regarding the information contained in this letter or any questions you would like to address before the end of the year. We will be sending out our tax organizers in January. If you haven’t received one in the past but would like to, please call our office. As always, we appreciate your continued patronage and welcome the referrals of your friends and associates.
Starkey & Company, P.A.