The IRS and the Social Security Administration have released 2019 inflation-adjusted figures for more than 50 tax provisions. In addition to a 2.8 percent cost-of-living adjustment (COLA) for Social Security beneficiaries, details about adjustments to tax rate schedules, exemptions, and various thresholds for deductions and credits were announced. The tax year 2019 adjustments generally are used on tax returns filed in 2020.
Tax Rate Tables
The highest marginal tax rate for individuals of 37 percent applies in 2019 to taxable income over $612,350 for married couples filing jointly and $510,300 for single taxpayers. This is an increase over the 2018 levels of $600,000 (up $12,350) and $500,000 (up $10,300), respectively. See the end of this article for all of the individual and the estate and trust income tax rate tables for 2019.
The thresholds related to the 3.8 percent Medicare tax on unearned income and the 0.9 percent Medicare tax on wages and self-employment income remain unchanged for 2019 ($250,000 for married couples filing jointly; $200,000 for single filers) as these amounts are not indexed for inflation. Estates and trusts enjoy a slight increase in the 3.8 percent Medicare tax threshold, however, because that threshold is equal to the dollar amount at which the highest income tax bracket begins.
Alternative Minimum Tax (AMT)
For 2019, the AMT exemption increases from $109,400 to $111,700 for married couples filing jointly and from $70,300 to $71,700 for single filers. The AMT exemption is reduced by 25 percent of the amount by which alternative minimum taxable income in 2019 exceeds $1,020,600 for married couples filing jointly ($510,300 for single taxpayers).
For 2019, the 28 percent AMT rate applies to excess alternative minimum taxable income above $194,800 ($97,400 for married taxpayers filing separately).
Itemized Deductions and Standard Deduction
The standard deduction for married couples filing a joint return is slightly higher for 2019. The new standard deduction is $24,400 (up $400). For single individuals and married couples filing separate returns, the standard deduction is $12,200 for 2019 (up $200). The 2019 standard deduction for heads of household increases to $18,350 (up $350).
Individuals with AGI in excess of certain thresholds no longer need to “hair cut” their total itemized deductions by the Pease limitation, which was removed under the new tax law.
Child Tax Credit
The amount of the child tax credit that may be claimed for each qualifying child is $2,000. The child tax credit begins to phase out for married couples filing a joint return with modified adjusted gross income in excess of $400,000, or $200,000 for all other taxpayers. The child tax credit and the phase-out levels are not indexed for inflation. For lower-income taxpayers, a portion of the child tax credit for each qualifying child is refundable, and the refundable portion in 2019 is $1,400, which is the same as the 2018 level.
Estate and Gift Tax
For 2019, the lifetime exclusion from estate and gift tax has increased from $11,180,000 to $11,400,000.
The annual gift tax exclusion in 2019 remains at $15,000. Gift splitting allows married couples to give up to $30,000 to a person without making a taxable gift. The exclusion for gifts to a spouse who is not a citizen of the United States increases $3,000 to $155,000 for 2019.
Education
The Hope Scholarship credit (American Opportunity Tax Credit) is equal to 100 percent of the amount of qualified tuition and related expenses not in excess of $2,000, plus 25 percent of those expenses that exceed $2,000 but do not exceed $4,000. Because the eligible expenses are not indexed for inflation, the maximum credit remains $2,500. This credit begins to phase out for single individuals whose modified adjusted gross income (MAGI) exceeds $80,000 and at $160,000 for married couples filing joint returns (these amounts also are not adjusted for inflation).
For tax years beginning in 2019, the Lifetime Learning Credit phases out for single individuals whose MAGI exceeds $58,000 and at $116,000 for married couples filing joint returns.
The $2,500 maximum deduction for interest paid on qualified education loans begins to phase out for single individuals with MAGI in excess of $70,000 and for married couples filing joint returns with MAGI in excess of $140,000 in 2019. The deduction is completely phased out for taxpayers at 2019 MAGI of $85,000 for single individuals and $170,000 for married couples filing joint returns.
Kiddie Tax
The amount used to reduce the net earned income reported on a child’s return subject to the kiddie tax remains at $1,100 in 2019. The same $1,100 amount is used to determine if a parent may elect to include a child’s gross income in the parent’s income and to calculate the kiddie tax.
Foreign Earned Income
For individual taxpayers who work overseas, the amount of foreign earned income that may excluded from taxation increases from $103,900 to $105,900 in 2019.
COLA Limits for Qualified Plans
The cost of living adjustments (COLAs) affect the maximum limits for a variety of contributions and distributions for 2019, including defined benefit accounts, 401(k)s, and other defined contribution plans, as well as limits on employee stock ownership plans (ESOPs) and benefits to highly-compensated employees.
Defined Contribution Plans
The limits on elective deferrals to 401(k), 403(b), certain 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,500 to $19,000 for 2019. The limit on annual additions to defined contribution plans is increased in 2019 from $55,000 to $56,000.
Defined Benefit Plans and ESOPs
The maximum amount a defined benefit plan may pay a participant each year is increased in 2019 from $220,000 to $225,000. The amount for determining the maximum ESOP account subject to a five-year distribution period is increased to $1,130,000 in 2019. The dollar amount used to determine the lengthening period of the five-year distribution is also increased to $225,000 for 2019.
Compensation Related Limits / Definitions
The annual compensation limit relating to the maximum compensation counted for an eligible employee in a qualifying plan is increased by $5,000 to $280,000 for 2019. The limitation used in the definition of a highly compensated employee is increased by $5,000 to at $125,000. The dollar limitation concerning the definition of key employee in a top heavy plan is increased by $5,000 to $180,000. The compensation amount relevant to the definition of control employee for fringe benefit valuation purposes in 2019 remains unchanged at $110,000 for officers and but increases to $225,000 for other employees.
Individual Retirement Accounts (IRAs)
Eligible taxpayers can contribute up to $6,000 to an IRA (excluding catch-up contributions discussed below), which is an increase of $500 for 2019. For taxpayers who are active participants in an employer-sponsored retirement plan, the deduction for making contributions to a traditional IRA is phased out for single taxpayers who have MAGI in 2019 between $64,000 and $74,000, up from the 2018 amounts of $63,000 and $73,000. For married couples filing a joint return, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $103,000 to $123,000 in 2019, up from $101,000 and $121,000 for 2018. For married couples filing a joint return, in which the spouse who makes the IRA contribution is not an active participant in an employer-sponsored retirement plan but the other spouse is a participant, the deduction is phased out if the couple’s 2019 income is between $193,000 and $203,000, up from $189,000 and $199,000 in 2018.
The MAGI phase-out range for taxpayers making contributions to a Roth IRA in 2019 is $193,000 to $203,000 for married couples filing jointly, up from $189,000 to $199,000 in 2018. For single taxpayers, the income phase-out range in 2019 is $122,000 to $137,000, up from $120,000 to $135,000 in 2018.
Catch-up Contributions
The elective deferral limit for a SIMPLE plan is increased by $500 to $13,000 in 2019. The $3,000 catch-up amount for SIMPLE plans remains unchanged for 2019.
Social Security Wage Base Increases for 2019
The maximum amount of earnings subject to Social Security increased from $128,400 to $132,900 (up $4,500) in 2019. The Social Security Administration also reported that Social Security and Supplemental Security Income benefits will increase by 2.8 percent for 2019.
We have summarized the most common inflation adjustments here. For more information:
2019 Tax Rate Tables
| Married Individuals Filing Joint Returns and Surviving Spouses |
| If Taxable Income Is: | The Tax Is: |
| Not over $19,400 | 10% of the taxable income |
| Over $19,400 but not over $78,950 | $1,940 plus 12% of the excess over $19,400 |
| Over $78,950 but not over $168,400 | $9,086 plus 22% of the excess over $78,950 |
| Over $168,400 but not over $321,450 | $28,765 plus 24% of the excess over $168,400 |
| Over $321,450 but not over $408,200 | $65,497 plus 32% of the excess over $321,450 |
| Over $408,200 but not over $612,350 | $93,257 plus 35% of the excess over $408,200 |
| Over $612,350 | $164,709.50 plus 37% of the excess over $612,350 |
| Unmarried Individuals (other than Surviving Spouses and Heads of Households) |
| If Taxable Income Is:: | The Tax Is: |
| Not over $9,700 | 10% of the taxable income |
| Over $9,700 but not over $39,475 | $970 plus 12% of the excess over $9,700 |
| Over $39,475 but not over $84,200 | $4,543 plus 22% of the excess over $39,475 |
| Over $84,200 but not over $160,725 | $14,382.50 plus 24% of the excess over $84,200 |
| Over $160,725 but not over $204,100 | $32,748.50 plus 32% of the excess over $160,725 |
| Over $204,100 but not over $510,300 | $46,628.50 plus 35% of the excess over $204,100 |
| Over $510,300 | $153,798.50 plus 37% of the excess over $510,300 |
| Married Individuals Filing Separate Returns |
| If Taxable Income Is: | The Tax Is: |
| Not over $9,700 | 10% of the taxable income |
| Over $9,700 but not over $39,475 | $970 plus 12% of the excess over $9,700 |
| Over $39,475 but not over $84,200 | $4,543 plus 22% of the excess over $39,475 |
| Over $84,200 but not over $160,725 | $14,382.50 plus 24% of the excess over $84,200 |
| Over $160,725 but not over $204,100 | $32,748.50 plus 32% of the excess over $160,725 |
| Over $204,100 but not over $306,175 | $46,628.50 plus 35% of the excess over $204,100 |
| Over $306,175 | $82,354.75 plus 37% of the excess over $306,175 |
| Heads of Households |
| If Taxable Income Is: | The Tax Is: |
| Not over $13,850 | 10% of the taxable income |
| Over $13,850 but not over $52,850 | $1,385 plus 12% of the excess over $13,850 |
| Over $52,850 but not over $84,200 | $6,065 plus 22% of the excess over $52,850 |
| Over $84,200 but not over $160,700 | $12,962 plus 24% of the excess over $84,200 |
| Over $160,700 but not over $204,100 | $31,322 plus 32% of the excess over $160,700 |
| Over $204,100 but not over $510,300 | $45,210 plus 35% of the excess over $204,100 |
| Over $510,300 | $152,380 plus 37% of the excess over $510,300 |
| Estates and Trusts |
| If Taxable Income Is: | The Tax Is: |
| Not over $2,600 | 10% of the taxable income |
| Over $2,600 but not over $9,300 | $260 plus 24% of the excess over $2,600 |
| Over $9,300 but not over $12,750 | $1,868 plus 35% of the excess over $9,300 |
| Over $12,750 | $3,075.50 plus 37% of the excess over $12,750 |
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