The Tax Cut and Jobs Act (TCJA) was enacted in 2018. Certain provision of the TCJA did not take effect until January 1, 2019.
In December, legislation was enacted which effects retirement accounts and expired deductions.
TCJA changes that take effect in 2019 include
The major change is the treatment of alimony. Under pre -2019 law alimony paid was a deduction and alimony received was taxable to the recipient. This is no longer the law. For divorces and legal separations that are executed after 2018, alimony is no longer deductible to the payor and no longer taxable to the recipient.
It's important to emphasize that the current rules continue to apply to already-existing divorces and separations, as well as divorces and separations that were executed before 2019.
Some taxpayers may want the TCJA rules to apply to their existing divorce or separation. Under a special rule, if taxpayers have an existing (pre-2019) divorce or separation decree, and they have that agreement legally modified, then the new rules don't apply to that modified decree, unless the modification expressly provides that the TCJA rules are to apply. There may be situations where applying the TCJA rules voluntarily is beneficial for the taxpayers, such as a change in the income levels of the alimony payer or the alimony recipient.
Health Insurance Mandate
The insurance mandate penalty has been suspended. Therefore if you have no health insurance there is no penalty.
Only taxpayers in a federally declared disaster area are allowed to claim a casualty deduction.
There is now a questions asking "At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?"
Identity Protection PIN
The IRS has begun a program that allows taxpayers in certain states to receive an Identity Pin which previously was only available to taxpayers that had identity theft. For more information go to https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin
In December, the “Taxpayer Certainty and Disaster Tax Relief Act of 2019” (the “Disaster Act”) was enacted. The Disaster Act extends over 30 Code provisions, generally through 2020. Highlights include:
Discharge of Mortgage Indebtness
Under pre-Disaster Act law, discharge of indebtedness income from qualified principal residence debt, up to a $2 million limit ($1 million for married individuals filing separately), was, in tax years beginning before Jan. 1, 2018, excluded from gross income. The Disaster Act extends this exclusion for two years, i.e., for discharges of indebtedness before Jan. 1, 2021.
Mortgage Insurance Premiums
Under pre-Disaster Act law, mortgage insurance premiums paid or accrued before Jan. 1, 2018 by a taxpayer in connection with acquisition indebtedness with respect to the taxpayer's qualified residence were treated as deductible qualified residence interest, subject to a phase-out based on the taxpayer's adjusted gross income (AGI). The Disaster Act extends this treatment through 2020 for amounts paid or incurred after Dec. 31, 2017.
The Disaster Act extends the threshold of 7.5% for tax years beginning after Dec. 31, 2018 and before Jan. 1, 2021.
Qualified Tuition Expenses
The Code provides an above-the-line deduction for qualified tuition and related expenses for higher education. The deduction is capped at $4,000 subject to phase outs. The Disaster Act extends this credit through 2020.
The Secure Act was also passed in December. This act made changes to Retirement accounts. Highlights include:
Mandatory Required Distributions (RMD)
Starting Jan. 1, 2020, the new bill pushes the age at which you need to start withdrawing money from your traditional retirement accounts to age 72 from age 70 ½. Those who are currently 70½ or older should not interrupt their RMDs but proceed with them as scheduled under current rules. Those who turn 70½ on or after Jan. 1, 2020, are subject to the new rules and will have an extra year and a half before they need to start withdrawals.
The bill essentially eliminates the “stretch IRA,” an estate planning method that allows IRA beneficiaries to stretch their distributions from their inherited account. If you named your grandchild as your beneficiary, for example, most of your account can stay invested for decades past your death, But under the new law, most beneficiaries will have to withdraw all the distributions from their inherited account and pay taxes on it within 10 years. Exceptions are made for certain beneficiaries, including spouses and the chronically ill or disabled.
This provision is not retroactive and will not affect those who have already inherited an IRA. It will apply to those who inherit them starting on Jan. 1, 2020, and may affect the estate planning of those planning to pass on an IRA to a non-spouse.
An individual who has attained age 70 ½ by the close of a year is not permitted to make contributions to a traditional IRA. Under the new law contributions for tax years beginning after Dec. 31, 2019 the age restriction is repealed.