2018 Tax Season to open January 28th and New Numbers for 2019

Well 2019 is underway and we are about to enter the tax season. The IRS has announced, that even though we are in the midst of a government shutdown, they will start accepting returns January 28th – and refunds will be issued.

Here are a few numbers to pay attention to for 2019 planning purposes:

The federal estate tax exemption was raised to $11.4 million per individual, $22.8 million per married couple in 2019 – if that pertains to you, you can buy the drinks!

In 2019, the Social Security wage cap is $132,900, up slightly from $128,400 in 2018. Social Security tax (6.2%) applies to wages up to this amount as set annually by the Social Security Administration. Income above that threshold is not subject to Social Security tax (by contrast, medicare tax is uncapped, with a rate of either 1.45% or 2.35%, depending on your income level).

In 2019, retirement contribution amounts were increased by $500:
The contribution limit for 401(k)s, 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan will increase from $18,500 in 2018 to $19,000 in 2019. The 401(k) catch-up contribution limit for employees age 50 and older is unchanged at $6,000. Older workers can contribute a maximum of $25,000 to 401(k) plans in 2019. Employer contributions aren’t included in these limits.
SIMPLE IRA plans have a lower limit than 401(k) plans. They will also go up by $500 from $12,500 in 2018 to $13,000 in 2019. If you are age 50 or over, the catch-up contribution limit will stay the same at $3,000 in both 2018 and 2019. Employer contributions aren’t included in these limits.
The IRA contribution limit will also grow by $500 to $6,000 in 2019, the first increase in the limit since 2013. However, the IRA catch-up contribution limit for those age 50 and older is not subject to a cost-of-living adjustment and will remain $1,000.

Traditional IRA income cutoffs for 2019. Workers who don’t have access to a 401(k) plan or similar type of retirement account through their job can contribute to a tax-deductible IRA regardless of how much they earn. However, employees who are eligible for a 401(k) plan may be prohibited from additionally claiming a tax deduction on an IRA contribution if they earn too much.
401(k) participants are prohibited from claiming a tax deduction for a 2019 IRA contribution if they earn more than $74,000 as an individual and $123,000 as a married couple filing jointly, up $1,000 and $2,000, respectively, from 2018. The tax deduction is phased out for individuals earning more than $64,000 and couples earning more than $103,000 in 2019. If only one member of a married couple is eligible for a 401(k) plan at work, the IRA tax deduction is phased out if the couple’s income is between $193,000 and $203,000 in 2019, up $4,000 from the previous year.

Roth IRA income limits for 2019. After-tax Roth IRA contributions allow you to qualify for tax-free investment growth and tax-free withdrawals in retirement. Workers can earn $2,000 more in 2019 ($4,000 for couples) and remain eligible to contribute to a Roth IRA. The ability to make Roth IRA contributions is phased out for workers who earn more than $122,000 as an individual and $193,000 as a married couple in 2019. Those who earn more than $137,000 as an individual or $203,000 as a married couple aren’t able to directly contribute to a Roth IRA in 2019.

Stephan P. McMahon & Company