If you are 65 or older (or turn 65 any time in 2019), you will have the option to use a new simple tax form for seniors, known as the 1040SR, when you file your 2019 taxes in April 2020.
The IRS has released a draft of the new simplified tax individual income tax form, Form 1040-SR. The draft of the Form 1040-SR is two pages long. It allows seniors of any filing status to use the form. It also allows senior taxpayers with dependents to use the form. The draft Form 1040-SR allows taxpayers to enter income from wages, salaries, tips, interest, dividends, IRA distributions, pensions and annuities, and social security benefits and to report taxable amounts of IRA distributions, pension and annuities and social security benefits.
The draft Form 1040-SR also provides for reporting capital gains or losses on line 6 and prompts the taxpayer to attach a Schedule D, if required. On line 7(a), Form 1040-SR allows senior taxpayers to report other income that may appear on Schedule 1. Other income reported on Schedule 1 includes alimony and unemployment compensation.
On line 9, the draft Form 1040-SR prompts the taxpayer to enter either the standard deduction or itemized deductions from Schedule A. Taxpayers using Form 1040-SR will be able to claim the qualified business income deduction on Line 10.
The draft Form 1040-SR also allows taxpayers to claim the child tax credit or credit for other dependents, the Earned Income Credit and American opportunity credit.
2019 EITC Income Limits, Maximum Credit Amounts and Tax Law Updates
Earned Income and AGI Limits
The tax year 2019 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||$15,570||$41,094||$46,703||$50,162|
|Married Filing Jointly||$21,370||$46,884||$52,493||$55,952|
Investment Income Limit
Investment income must be $3,600 or less for the year.
Maximum Credit Amounts
The maximum amount of credit for Tax Year 2019 is:
- $6,557 with three or more qualifying children
- $5,828 with two qualifying children
- $3,526 with one qualifying child
- $529 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
Standard Deduction Amount Increased
For 2019, those who are married and filing jointly will have a standard deduction of $24,400.
Single taxpayers and those who are married, and file separately now have a $12,200 standard deduction.
For heads of households, the deduction will be $18,350
The penalty for not having health insurance no longer applies for 2019 federal tax returns. However, some states have their own individual health insurance mandate, requiring you to have qualifying health coverage or pay a penalty with your state tax return.
California has a new state individual health care mandate, which takes effect on January 1, 2020, and requires Californians to have qualifying health insurance coverage throughout the year, or pay a penalty based on your income and the number of people in your household.
|Summary of possible penalties|
|Household Size||If You Make Less Than||You May Pay|
|Family of 4||$140,200||$2,085|
Under the new Tax Cuts and Jobs Act (TCJA) the following child tax credit changes will take place in 2019:
- The Child Tax Credit under 2019 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 2019.
- 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: