At the start of each year, the IRS makes changes to more than a dozen tax-related maximums, minimums, thresholds and other statutory numbers that can affect your bottom line for the that tax year…and that may bear greatly on your tax planning for that year as well. Many of these changes reflect “real life” in that they are tied to changes in the cost of living, but others may be due to shifting priorities in tax policy.
Now that 2019 is under way, to plan wisely, look over the following widely-applicable amounts and consider how they bear on your situation…and be sure to follow them. (And if your tax situation is unusual, ask your tax advisor whether there are other, less-well-known changes to amounts that you should take into account for 2019.)
- Social Security maximum wage base: $132,900
- Social Security employee and employer maximum matching amounts: $8,239.80 for each
- Self-employment maximum Social Security tax: $16,479.60
- IRA or Roth IRA contribution limit for people under age 50: $6,000
- IRA or Roth IRA contribution limit for those 50 or older: $7,000
- 401(k) and 403(b) maximum deferral amount for people under age 50: $19,000
- 401(k) and 403(b) maximum deferral amount for those 50 or older: $25,000
- SIMPLE IRA maximum contribution for people under age 50: $13,000
- SIMPLE IRA maximum contribution for those 50 or older: $16,000
- Total defined-contribution plan contribution limit from all sources (including, for example, employer match and profit-sharing): $56,000
- Flexible spending account maximum contribution: $2,700
- Mileage rates for deductible automobile use: standard, 58¢…medical, 20¢…charity, 14¢
- Gift tax annual exclusion: $15,000. This is doubled with a consenting spouse.
- Lifetime estate and gift tax exemption: $11.4 million. This is doubled with a consenting spouse.
- Capital gains zero-tax bracket: Joint filers with taxable income not exceeding $78,750. Single and married-filing-separate filers with taxable income not exceeding $39,375. Heads of household with taxable income not exceeding $52,750.
Here are some early-in-the-year retirement plan tips:
- Consider making your 2019 contributions in January 2019 or as early in the year as you can so that your tax-deferred earnings start.
- Some plan contributions for 2018 can be made in 2019, and some types of plans can be opened in 2019 for the 2018 tax year. Ask your tax adviser whether this applies to you and would benefit you.
- Don’t overlook contributions to an IRA for a nonworking spouse—this is a powerful way for the working spouse to increase tax-advantaged savings for the couple.
- Self-employed people with no employees should consider a “solo 401k” combined with a profit-sharing plan. Some of the rules covering these arrangements are technical and complicated, but the result can be significant on current tax savings and deferrals. Keep in mind that there are deadlines and phase-outs, so always check with your tax advisor before acting.
The two bulleted lists above cover the early-year planning items that we get the most questions about. There are others that might apply to you, of course—so check with your tax advisor.
Thanks to my partner Brian Lovett, CPA, JD, for his assistance in preparing this listing.