As part of a larger effort to help taxpayers, the Internal Revenue Service plans to streamline the Form 1040 into a shorter, simpler form for the 2019 tax season.
The new 1040 – about half the size of the current version — would replace the current Form 1040 as well as the Form 1040A and the Form 1040EZ. The IRS circulated a copy of the new form and will work with the tax community to finalize the streamlined Form 1040 over the summer.
This new approach will simplify the 1040 so that all 150 million taxpayers can use the same form. The new form consolidates the three versions of the 1040 into one simple form. At the same time, the IRS will still obtain the information from each taxpayer needed to determine their tax liability or refund.
The new Form 1040 uses a “building block” approach, in which the tax return is reduced to a simple form. That form can be supplemented with additional schedules if needed. Taxpayers with straightforward tax situations would only need to file this new 1040 with no additional schedules.
Since more than nine out of 10 taxpayers use software or a tax preparer, the IRS will be working with the tax community to prepare for the streamlined Form 1040. This will also help ensure a smooth transition for people familiar with software products and the interview process used to prepare tax returns.
Taxpayers who file on paper would use this new streamlined Form 1040 and supplement it with any needed schedules.
2018 EITC Income Limits, Maximum Credit Amounts and Tax Law Updates
Earned Income and AGI Limits
The tax year 2018 Earned income and adjusted gross income (AGI) must each be less than:
|If filing…||Qualifying Children Claimed|
|Zero||One||Two||Three or more|
|Single, Head of Household or Widowed||$15,270||$40,320||$45,802||$49,194|
|Married Filing Jointly||$20,950||$46,010||$51,492||$54,884|
Investment Income Limit
Investment income must be $3,500 or less for the year.
Maximum Credit Amounts
The maximum amount of credit for Tax Year 2018 is:
- $6,431 with three or more qualifying children
- $5,716 with two qualifying children
- $3,461 with one qualifying child
- $519 with no qualifying children
For more information on whether a child qualifies you for EITC, see:
- Qualifying Child Rules, or
- Publication 596, Rules If You Have a Qualifying Child.
Tax Reform Provisions that Affect Individuals
Personal Exemption Deduction Eliminated
Personal exemption deductions for yourself, your spouse, or your dependents have been eliminated beginning after December 31, 2017, and before January 1, 2026.
Standard Deduction Amount Increased
For 2018, those who are married and filing jointly will have an increased standard deduction of $24,000, up from the $13,000 it would have been under previous law.
Single taxpayers and those who are married, and file separately now have a $12,000 standard deduction, up from the $6,500 it would have been for this year prior to the reform.
For heads of households, the deduction will be $18,000, up from $9,550.ty
Deduction for personal casualty and theft losses suspended (unless incurred in federally-declared disaster area)
Limitations to the deduction for state and local taxes
Limitations to the deduction for home mortgage interest in certain cases
Eliminating most miscellaneous itemized deductions such as:
- Deductions for employee business expenses
- Tax preparation fees
- Investment expenses, including investment management fees
- Employment related educational expenses
- Job search expenses
- Hobby losses
- Safe deposit box fees
- Investment expenses from pass-through entities
Eliminated the limitation on itemized deductions for certain high-income taxpayers.
SALT – State and Local Income Tax
The deductibility of state and local tax payments for federal income tax purposes is now limited to $10,000 a calendar year.
A taxpayer who makes payments or transfers property to an entity eligible to receive tax deductible contributions must reduce their charitable deduction by the amount of any state or local tax credit the taxpayer receives or expects to receive.
Moving Expenses No Longer Deductible
The deduction for moving expenses has been suspended for most taxpayers for tax years beginning after Dec. 31, 2017 through Jan. 1, 2026. This suspension does not apply to members of the Armed Forces of the United States on active duty who move pursuant to a military order related to a permanent change of station.
Depreciation and Expensing
Some laws regarding depreciation deductions have changed. A taxpayer may elect to expense the cost of any section 179 property and deduct it in the year the property is placed in service. The new law increased the maximum deduction from $500,000 to $1 million. It also increased the phase-out threshold from $2 million to $2.5 million.
Tax Treatment of alimony and separate maintenance payments.
Top Income Tax Rate
A new 37 percent top rate will affect individuals with incomes of $500,000 and higher. The top rate kicks in for married taxpayers who file jointly at $600,000 and up.
The new tax law also includes changes to other tax brackets.Images
The estate exemption doubles to $11.2 million per individual and $22.4 million per couple in 2018.
The deduction for interest is capped at $750,000 for mortgage loan balances taken out after Dec. 15 of last year. The limit is still $1 million for mortgages that were established prior to Dec. 15, 2017.
Contribution Limits for Retirement Savings
Employees who participate in certain retirement plans ‒ 401(k), 403(b) and most 457 plans, and the Thrift Savings Plan – can now contribute as much as $18,500 this year, a $500 increase from the $18,000 limit for 2017.
Savings in IRAs
Savers who contribute to individual retirement accounts will have higher income ranges following cost-of-living adjustments. Note that the deduction phases out for individuals and their spouses who are covered by workplace retirement plans.
For single taxpayers, the limit will be $63,000 to $73,000.
For married couples, the phaseout range will vary depending on whether the IRA contributor is covered by a workplace retirement plan or not. When the spouse who is investing has access to an employer plan, the range is $101,000 to $121,000. For individuals who don’t have a retirement plan but are married to someone who does, the phaseout has been raised to $189,000 to $199,000.
The phaseout was not adjusted for married individuals who file a separate return and who are covered by a workplace retirement plan. That range is $0 to $10,000.
Contributions to Roth IRAs
For individuals who are single or the heads of their households, the income phaseout has been raised to $120,000 to $135,000. For married couples who file jointly, the range climbs to $189,000 to $199,000.
The phaseout was not adjusted for married individuals who file a separate return. That is $0 to $10,000.
Under the new Tax Cuts and Jobs Act (TCJA) the following child tax credit changes will take place in 2018:
- The Child Tax Credit under 2018 tax reform is worth up to $2,000 per qualifying child. The age cut-off remains at 17 (the child must be under 17 at the end of the year for taxpayers to claim the credit).
- The refundable portion of the credit is limited to $1,400. This amount will be adjusted for inflation after 2018.
- The earned income threshold for the refundable credit is lowered to $2,500.
- The beginning credit phaseout for the CTC increases to $200,000 ($400,000 for joint filers). The phaseout also applies to the new family tax credit.
- The child must have a valid SSN to claim the nonrefundable and refundable credit.
Child Tax Credit Eligibility
The child you claim as your dependent has to meet six IRS tests:
- Age Test: The child you claim as your dependent must have been under age 17 (so, 16 or younger) at the end of the tax year.
- Relationship Test: The child must be your daughter, son, foster child or adopted child. The child can also be a grandchild or a descendant of one of your siblings.
- Support Test: The child must not have provided more than half of their own “support,” meaning the money they use for living expenses.
- Dependent Test: The child must be claimed as your dependent on your federal income tax return.
- Citizenship Test: The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
- Resident Test: The child must have lived with you for more than half of the tax year (with a few exceptions detailed on the Child Tax Credit worksheet).
In addition to these six tests, income is also an eligibility factor. As your modified adjusted gross income (MAGI) increases, the child tax credit begins to phase out. You’ll get $50 less in child tax credits for every $1,000 – or portion of $1,000 – that your modified AGI exceeds:
- $75,000 if you’re filing as the head of your household, single or as a qualifying widow(er)
- $110,000 if your filing status is married filing jointly
- $55,000 if your filing status is married filing separately
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Required Minimum Distributions (RMDs)
You cannot keep retirement funds in your account indefinitely. You generally have to start taking withdrawals from your IRA, SIMPLE IRA, SEP IRA, or retirement plan account when you reach age 70½. Roth IRAs do not require withdrawals until after the death of the owner.
Your required minimum distribution is the minimum amount you must withdraw from your account each year.
You can withdraw more than the minimum required amount.Your withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).
Calculating the required minimum distribution
The required minimum distribution for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS’s “Uniform Lifetime Table.”
To calculate the required amount you may click the following links:
An enrolled agent (EA) is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels—examination, collection, and appeals—of the Internal Revenue Service. In addition to taxpayer representation, enrolled agents often provide tax consultation services and prepare a wide range of federal and state tax returns. “
Because of the health care law, you might receive some forms early in the year providing information about the health coverage you had or were offered in the previous year. The information below is intended to help individuals understand these forms, including who should expect to receive them and what to do with them.
1. Will I receive any health care tax forms in 2017 to help me complete my tax return?
In early 2017, you may receive one or more forms providing information about the health care coverage that you had or were offered during the previous year. Much like Form W-2 and Form 1099, which include information about the income you received, these health care forms provide information that you may need when you file your individual income tax return. Also like Forms W-2 and 1099, these forms will be provided to the IRS by the entity that provides the form to you.
The forms are:
- Form 1095-A, Health Insurance Marketplace Statement. The Health Insurance Marketplace (Marketplace) sends this form to individuals who enrolled in coverage there, with information about the coverage, who was covered, and when.
- Form 1095-B, Health Coverage. Health insurance providers (for example, health insurance companies) send this form to individuals they cover, with information about who was covered and when.
- Form 1095-C, Employer-Provided Health Insurance Offer and Coverage. Certain employers send this form to certain employees, with information about what coverage the employer offered. Employers that offer health coverage referred to as “self-insured coverage” send this form to individuals they cover, with information about who was covered and when.
2. When will I receive these health care tax forms?
For tax year 2016, the deadline for the Marketplace to provide Form 1095-A is January 31, 2017. The deadline for insurers, other coverage providers and certain employers to provide Forms 1095-B and 1095-C has been extended to March 2, 2017.
3. Must I wait to file until I receive these forms?
If you are expecting to receive a Form 1095-A, you should wait to file your 2016 income tax return until you receive that form. However, it is not necessary to wait for Forms 1095-B or 1095-C in order to file.
Some taxpayers may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2016 tax return. While the information on these forms may assist in preparing a return, they are not required. Individual taxpayers should not wait for these forms and file their returns as they normally would.
Like last year, taxpayers can prepare and file their returns using other information about their health insurance. You should not attach any of these forms to your tax return.
Debido a la ley del cuidado de salud, usted podría recibir algunos formularios temprano en el año con información acerca de la cobertura médica que tuvo o que se le ofreció en el año anterior. La información que se incluye a continuación tiene el propósito de ayudarle a los individuos a entender estos formularios, incluyendo quién debe esperarlos y qué hacer con éstos.
1. ¿Recibiré formularios de cuidado médico en 2017 para ayudarme a completar mi declaración de impuestos?
A principios de 2017, usted podría recibir uno o más formularios con información acerca de la cobertura médica que usted tuvo o que se le ofreció durante el año anterior. Similares a los formularios W-2 y 1099, que incluyen información acerca del ingreso recibido, estos formularios de cuidado médico proveen información que usted podría necesitar para presentar su declaración de impuestos para individuos. Al igual que los formularios W-2 y 1099, estos formularios serán provistos al IRS por la entidad que le provee el formulario a usted.
Los formularios son:
- Formulario 1095-A, Declaración del Mercado de Seguros Médicos (en inglés). El Mercado de Seguros Médicos (Mercado) le envía este formulario a individuos que se inscribieron en cobertura a través de éste, con información acerca de la cobertura, quién estuvo cubierto y cuándo.
- Formulario 1095-B, Cobertura Médica (en inglés). Los proveedores de seguro médico (por ejemplo, las compañías de seguro médico) envían este formulario a los individuos a quienes cubren, con información acerca de quién estuvo cubierto y cuándo.
- Formulario 1095-C, Ofrecimiento y Cobertura de Seguro Médico Provista por el Empleador (en inglés). Ciertos empleadores envían este formulario a ciertos empleados, con información acerca del tipo de cobertura ofrecida. Los empleadores que ofrecen cobertura médica denominada como “cobertura auto asegurado” envían este formulario a individuos cubiertos con información acerca de quién estuvo cubierto y cuándo.
2. ¿Cuándo recibiré estos formularios tributarios de cuidado médico?
Para el año tributario de 2016 la fecha límite para el Mercado proveer el Formulario 1095-A es el 31 de enero de 2017. La fecha límite para las aseguradoras, otros proveedores de cobertura y ciertos empleadores proveer los formularios 1095-B y 1095-C se extendió hasta el 2 de marzo de 2017.
3. ¿Debo esperar a recibir estos formularios para presentar?
Si usted espera recibir un formulario 1095-A, debe esperar a recibirlo para presentar su declaración de impuestos de 2016. Sin embargo, no es necesario esperar por los formularios 1095-B o 1095-C para presentar.
Puede que algunos contribuyentes no reciban un formulario 1095-B o 1095-C para el momento en que estén preparados para presentar su declaración de impuestos de 2016. Mientras que la información que aparece en estos formularios puede ayudarle a preparar la declaración, no son necesarios.
Tal y como el año anterior, los contribuyentes pueden preparar y presentar su declaración con otra información disponible acerca de su cobertura médica. Usted no debe incluir ninguno de estos formularios en su declaración de impuestos.