This week, we are pleased to bring you the 2019 tax estimates based on the updated cost of living adjustments. When the IRS publishes the official numbers, DBS will make the official 2019 Tax Guide available for your use. Click here to view the 2019 tax estimates.
Some Important Changes
As your clients begin their year-end tax-planning process, they will likely notice several changes in the filing of their 2018 tax return due to the tax legislation that became law last December. One change that may not be clear to most taxpayers is that the cost of living adjustment is now based on chain-CPI. This change will reduce inflation increases to provisions such as tax brackets and standard deduction. One provision where this change is creating some unease is in the long-term care space where the chain-CPI adjustment reduces the per diem benefit limit and deduction for qualified long-term care premiums. The reduced limits are illustrated in the attached tax guide, but the IRS official release may use other factors to make the final adjustment.
The first thing clients are likely to notice is the new look of the 1040 form. As part of a larger effort to help taxpayers, the Internal Revenue Service plans to streamline this form into a shorter, simpler form for the 2019 tax season. The new version is about half the size of the old version and this single form version is intended for use by all taxpayers, instead of three different forms required in years past. A copy of this draft is pictured here.
Next, many taxpayers will not need to file an itemized deduction form. This is due to the fact that the legislation set limits or eliminated many itemized deductions while at the same time increased the standard deduction to $12,000 for single taxpayers and $24,000 for taxpayers filing joint (2018).
Some of the biggest changes will be experienced by business-owning taxpayers. The new 20% qualified business income deduction applies to all business forms except those filing as a regular C-corporation. However, for certain specified service businesses, the deduction will be limited or eliminated if the taxable income of the taxpayer and their spouse exceeds certain thresholds. The 2019 tax guide includes a new section with the Income threshold limits. Many of our readers should pay special attention to these limits because these circumstances apply to one type of specified service business in particular: financial service practices.
How Can DBS Help?
If you have questions or comments concerning the tax guide, call the DBS in-house advanced case design resource, Terri Getman, JD*, CLU, ChFC, RIPC, AEP (Distinguished) at extension 230.