No. of Recommendations: 15

The 8 Most Common 2019 Tax Return Questions, Answered by Experts
By Tara Siegel Bernard and Ron Lieber, The New York Times, Feb. 13, 2019

The most important changes to the tax code in decades have taken effect — and filers are confused. We asked CPAs and other tax-prep pros to simplify things.

1. I thought my tax bill was going to decrease. What happened?

For many people living in high-tax states like New York, California, New Jersey and Connecticut, there’s one overriding reason their tax bills have risen: Their state and local tax deduction, known as SALT, will be capped at $10,000. This includes state and local income taxes, as well as real estate taxes....

4. Have any popular deductions and credits changed? What did we lose, and what can I still claim?

Dependent exemption: Under the previous law, families were able to claim a $4,050 exemption for each qualifying child, but that deduction has been eliminated. Instead, if you have children under the age of 17, you may qualify for the child tax credit, which was raised to $2,000 from $1,000 for each child. ...The law also introduced a $500 credit for other dependents, which could include elderly parents or children over the age of 17.
[The dependent person does not have to be a relative and does not have to live with you as long as you provide over half of their maintenance. -- W]

[end quote]

This is a good article with some of the most important changes.

Also, beware of changes in other laws which can be significant "gotchas."

The 2017 lower tax rates are only for 5 years and then will revert back to the higher tax rates. Since I am 65 I will be forced to take Required Minimum Distributions (RMDs) from my Traditional IRA at age 70.5 when the taxes will go up. In 2018, I distributed a significant amount of Traditional IRA money into my Roth IRA in order to pay the lower tax now and enable it to grow tax-free in the future.

What I didn't realize is that this distribution affects Medicare, pushing DH and me into a higher-income bracket which increases the cost of Medicare. (This is my first year receiving Medicare so I don't know all the ins and outs yet.) After I got over the shock, I tried to re-characterize some of the Roth distribution back to my Traditional IRA, which has always been allowed in the past. However, the 2017 tax law now prohibits recharacterization of a Trad --> Roth --> Trad distribution so I can't do that. :-(

I don't know when Medicare will increase our bills. I don't intend to make the same mistake this year. I don't know how to let Medicare know that this increase is a one-time situation.

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.