Good News … And The Bad

What Will Social Security Recipients’ Medicare Premiums Be in 2019?

The Centers for Medicare & Medicaid Services announced that most people will pay $135.50 per month for Medicare Part B in 2019, up slightly from $134 per month in 2018.

A small group of Medicare beneficiaries (about 3.5%) will pay less because of the cost-of-living increase in their Social Security benefits is not large enough to cover the full premium increase.  The “hold-harmless provision” prevents enrollees’ annual increase in Medicare premiums from exceeding their cost-of-living increase in Social Security benefits if their premiums are automatically deducted from their Social Security payments.  Social Security benefits are increasing by 2.8% in 2019, which will cover the increase in premiums for most people.

Premiums are increased for higher income beneficiaries – those with adjusted gross income plus tax-exempt interest income of more than $85,000 if single or $170,000 if married filing jointly.  These beneficiaries already pay a high-income surcharge, but a new surcharge tier will kick in for 2019 for people with the highest incomes.  Overall monthly premiums for higher-income beneficiaries will range from $189.60 to $460.50 per person, depending on income.

Got Everything We Need?

Here is a list of frequently missed items.  Check these against your list.

ü  Child Care Expenses.  I need the full name, address, telephone number, tax ID number of your care providers and the total paid per child.

ü  Estimated Federal Tax Payments.  Find the date and amount for payments.  April 15, 2018, June 15, 2018, September 15, 2018 and January 15, 2019.  A Federal January 2018 payment would have been claimed on your 2017 return.

ü  Sales of Property.  The most important thing is the Final Settlement Statement.  Include a list of home improvements in all prior years since purchase.

ü  College Tuition.  Form 1098-T lists tuition paid.  These forms are mailed to the student.  Make sure that the “student” watches for these forms and gives them to you.  I need these forms as well as details on the courses, all education-related expenses, when each item was paid and who the “student” was.

ü  Sales of Stock.  Form 1099-B shows sales price.  If this form does not show the original purchase information you will need to provide this.

ü  New Tax Rules on Pass-Through Entities.  Schedule K-1 from partnerships and S-Corps always seem to arrive late.  Don’t worry.  We can do the rest of your return and be ready to finish when the elusive K-1 arrives.

ü  Social Security Benefits.  Look for Form 1099-SSA.  We must report the gross amount and not just your net monthly benefit.  Your Medicare Premiums listed on the Form may also get you a medical deduction.

ü  Employees – Last Pay Stub.  Your W-2 is critical, but your last pay stub may reveal tax deductions that don’t usually show up anywhere else.

ü  Special Accounts.  Do you contribute to an IRA, Roth IRA or Health Savings Account?  These and others can affect your taxes.  Make sure I have all 1099s and information on contribution amount and dates.

ü  Complex Transactions.  Please call if you have a foreclosure, sale or exchange of real estate, casualties such as theft of natural disaster.

Myth vs. Truth


I will pay less taxes for 2018… guaranteed!


Many people will most likely pay less taxes, but not everyone.

Yes, rates for almost all the individual tax brackets have been lowered and the Alternative Minimum Tax (AMT) exemption has increased, but unfortunately, that doesn’t mean that everyone will pay less taxes.  The deductions that caused a high-income taxpayer to pay AMT are now eliminated, so some people will pay more in regular taxes for 2018 than in 2017, while paying little or no AMT.  Personal exemptions have also been eliminated in exchange for a larger child tax credit which disappears  when a dependent reaches age 17.

Tax payers who itemize will be limited to a maximum deduction of $10,000 on their combined state and local income taxes, property taxes and personal property taxes.  These are examples of how our complex tax system may end up taking more money from you than in prior years.


State Tax Returns won’t be affected.


Many states that have an income tax often use federal income tax numbers to some extent.  Many people believe that the tax reform won’t have any influence over their state’s income tax code, but that’s not true.  The truth is that several states copy federal tax system characteristics and use it as their own or use the federal return numbers as a jumping off point.  Other states do not conform to federal tax characteristics.  NOTE:  VERMONT AND CALIFORNIA HAVE MADE MAJOR CHANGES OR HAVE NOT CONFORMED TO FEDERAL TAX LAW.


Tax reform will be bad for seniors.


Retirees may be the most concerned about what tax reform will mean for them.  Proposed reforms will not change the way Social Security and investment income are taxed currently.

Many retirees may benefit from the doubling of the standard deduction to $24,000 for married couples filing jointly and $12,000 for single filers.

New Increased Credit & Expanded Income Eligibility!

Child Tax Credit.  A credit up to $2,000 is available for each qualifying child under age 17. The credit is now expanded with the full $2,000 available for married couples with up to $400,000 adjusted gross income or up to $200,000 for all other filing statuses.  The tax reform bill also includes a nonrefundable $500 “family credit” for other dependents.  Examples might include an aging parent who depends on you for care or a child whose support you provide but is 17 years old or older.

College Education.   Two credits are still available.  The American Opportunity Tax Credit can reduce your tax bill by up to $2,500 per eligible student.  The adjusted gross income (AGI) of the person claiming the credit has been expanded to $80,000 or less for single filers or $160,000 or less for married couples filing jointly.  A partial credit may be available for people whose income exceeds these limits but is less than $90,000 (single) or $180,000 (joint).  These are known as the “phase out” limits, above which the ability to take the credit phases out entirely.  The Lifetime Learning Credit has a limit of $2,000 per eligible student.  The AGI limits for the full credit are $56,000 for single taxpayers and $112,000 for married couples filing jointly and the phase out limits are $66,000 and $132,000, respectively.

0% Capital Gains Rate!  The long-term capital gains rate is available to all taxpayers in the 10% and 12% tax brackets.  Married taxpayers qualify for the 0% capital gains rate if their taxable income is $77,200 or less, for single taxpayers $38,600 or less.

Tax Free Gains Still Available on Home Sales.  Married couples can exclude up to $500,000 in gain from their income on the sale of their home, for single taxpayers the maximum exclusion is $250,000.  You must own and live in the home for at least 2 of the five years prior to the home sale.

April 15, 2019 Is Just Around the Corner

Most tax records will show up in the mail or online in January.  Collecting all your tax related documents is important so that we report a complete and accurate return.  The IRS also gets copies of many of these documents and must match your tax return to their records.

Let’s review what you should be looking for . . .

Ø  W-2s: Read them carefully.  Contact your employer if there is a discrepancy or if you don’t receive them by the end of January.

Ø  1099s:  You should receive 1099-INT or 1099-DIV forms for any accounts that pay interest or dividends.  Even tax-exempt interest must be reported.

IMPORTANT:  “Corrected” forms are always a possibility.  Be al