2019 Increases That Help Decrease Your Tax Liability

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Happy New Year! 2019 is here and with the new year come various cost of living adjustments released from the IRS. Will any of these increased limits help you reduce 2019 tax liability?

Mileage Rates

The business mileage rate for 2019 is going up significantly from 54.5 cents per mile to 58 cents per mile. If you have your own business and charge your business mileage back to the company, you should be sure to start using the higher mileage rate now. If you are an employee that is reimbursed by your employer, you should discuss your reimbursement with your employer to determine if you can start using the higher rate in 2019. Since miscellaneous employee expenses are no longer allowed as a deduction on individual tax returns, the higher business rate will only help if you are being reimbursed by your employer.

Medical mileage rate is also increasing from 18 cents per mile to 20 cents per mile. The charitable mileage rate remains unchanged at 14 cents per mile.

Retirement Contribution Limits

The elective deferral limit for employees to their 401k and 403(b) plans is increasing from $18,000 to $19,000. However, the catch-up contribution for individuals 50 and older will remain at $6,000.  Remember to increase your payroll deductions for the higher limits!

The limit for IRA’s which has not changed since 2013 is increasing from $5,500 to $6,000.

The maximum amount that an employee can elect to defer for a SIMPLE plan is increasing from $12,500 to $13,000.

The plan limit for a defined contribution plan is increasing from $55,000 to $56,000.

The benefit limit for a defined benefit plan is increasing from $220,000 to $225,000.

The compensation limit to participate in a SEP is remaining unchanged for 2019.

The other good news is the income ranges to determine if an IRA is deductible, if a contribution to a ROTH IRA is allowed or if a saver’s credit can be claimed are also increasing.

If you or your spouse are covered by an employer retirement plan, a deductible IRA contribution is only allowed if your adjusted gross income is below the IRS limits. If above that amount, then the amount that you can deduct will be phased out.

For 2019, if you are single and covered by a retirement plan, you start to lose your deduction between $64,000 to $74,000 of income.  Over $74,000, none of your IRA will be able to be deducted.

For married couples filing jointly, where the taxpayers are covered by employer plan, the phase out begins at $103,000 to $123,000.

For married couples where only one of the taxpayers are covered by an employer retirement plan, the phase out range is $193,000 to $203,000.

And for married couples that file separately and are covered by a workplace retirement plan, the income range is $0 to $10,000.

For Roth IRA’s to be allowed, the income phase out range is $122,000 to $137,000 for single people and head of households and $193,000 to $203,000 for married filing jointly couples. For married filing separately, the phase out limits remain at $0 to $10,000 of income.

There are several options available depending on your income level and what is available to you. Please be sure to check with your tax advisor to see what makes the most sense for your individual situation.

 

Kathi Koenig, CPA
Partner – McGowen, Hurst, Clark & Smith
p. 515.288.3279
e. kkoenig@mhcscpa.com

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Located in West Des Moines, Iowa with a branch office in Winterset, Iowa, McGowen, Hurst, Clark & Smith, P.C. celebrates 65 years of extending excellent service to our clients, providing them with accounting, auditing, consulting and investment expertise.

Established in 1946, our staff has grown from 3 to 60 employees, making us large enough to provide our clients with a broad base of experience and resources, yet small enough to offer very personalized service—which we feel makes us stand apart from other CPA firms. In addition to the traditional services of Accounting, Tax Preparation, Audit and Business Consulting, MHC&S offers our clients specialized services including Estate Planning, Business Valuations, Cost Segregation Studies, Retirement Planning, QuickBooks Training, Financial Advisory Services, Fraud Detection and Deterrence, Business Succession Planning, Litigation Support and more.

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