I’m always trying to use both my non-taxable accounts and taxable IRA income to keep my tax rate as low as possible. It amuses me when people will get a rise out of a killer 8% gain on an investment but give little thought about the retirement taxes they pay. The new tax brackets are from 10% to 37%, so saving on taxes for retirement distributions is a big deal too. But before you can do any retirement 2019 tax planning you have to know where you stand within the new tax laws. That’s the only way you can possibly structure your retirement income in a tax efficient way to stay below desired taxable income thresholds. Here are the recently released 2019 income tax details.
Retirement 2019 Tax Planning Details To Factor In
The big tax overhaul of questionable benefit to us regular folks went through last year and has a few tweaks for 2019. I’m looking forward in the coming months to seeing exactly what, if anything, the peanuts they tossed to low-income and middle class taxpayers works out for our 2018 tax filing once we put our final numbers to the 1040. No matter how the tax burdens and benefits shifted, we have to live with it and pay up. Knowing where we sit income-wise and looking at any options we may have to keep as much of it as we can is always a prudent retirement planning move. Once estimating our 2019 income and its taxable/non-taxable sources we can begin forming the basis for our retirement 2109 tax planning.
Deductions Were Moved Slightly Up
The taxes we end up paying are all about Taxable Income, therefore deductions are the logical starting point.
2019 Standard Deduction
Who can forget how they touted how their Tax Cuts and Jobs Act doubled our Standard Deduction but quietly said little about the elimination of personal exemptions which used to be $4,050 a piece. So much for a huge tax break. If you didn’t pay attention last year then may I be the first to say, SURPRISE! Your “Schedule A” goalpost was moved farther away. The Standard Deduction did adjust up a little from 2018.
Single Standard Deduction – 2018 it was $12,000. For 2019 it will be $12,200
Married Standard Deduction – 2018 it was $24,000. For 2019 it will be $24,400
Head of Household Deduction – 2018 it was $18,000. For 2019 it will be $18,350
2019 Retirement Contributions
For anyone still picking up a paycheck the amount that can be set aside tax deferred for retirement has also increased slightly for 2019.
401K – For 2018 it was $18,500. For 2019 it will be $19,000. Age 50 or older can add another $6,000 to that.
IRA – 2018 it was $5,500. For 2019 it will be $6,000. The age 50 or older catch-up contribution stays at $1,000.
Schedule A Deductions
Last year’s filing of 2017 will most likely be the last year I will ever be able to file with a Schedule A to save money. Increasing the Standard Deduction at the demise of Personal Exemptions only made filing long-form with Schedule A harder to benefit from. Add to that the other sweetie highlights of Tax Reform and depending on your state property tax and income tax rate, there will be some federal income tax filing pain ahead.
The new Mortgage Interest rules and caps from 2018 remain. Homes bought after 1/1/18 caps deductible interest at a $750,000 loan value. Equity loan interest remains non-deductible with no exceptions.
State and Local taxes are still capped at $10,000.
Medical Deduction is 10% of AGI (Adjusted Gross Income).
2019 Individual Income Tax Brackets
This is where the rubber meets the road. Retirement tax planning means trying to fall within the lowest tax brackets possible.
| 2019 Individual Income Tax Rates | Single-Taxable Income | Married Filing Jointly – Taxable Income | Head of Household – Taxable Income | Married Filing Separate – Taxable Income |
| 10 percent | 0 – $9,700
Pay 10% of taxable income |
0 – $19,400
Pay 10% of taxable income |
0 – $13,850
Pay 10% of taxable income |
0 – $9,700
Pay 10% of taxable income |
| 12 percent | $9,701 to $39,475
Pay $970 plus 12% of the amount above $ 9,700 |
$19,401 to $78,950
Pay $1,940 plus 12% of the amount above $19,400 |
$13,851 to $52,850
Pay $1,385 plus 12% of the amount above $13,8500 |
$9,701 to $39,475
Pay $970 plus 12% of the amount above $ 9,700 |
| 22 percent | $39,476 to $84,200
Pay $4,543 plus 22% of the amount above $39,475 |
$78,951 to $168,400
Pay $9,086 plus 22% of the amount above $78,950 |
$52,851 to $84,200
Pay $6,065 plus 22% of the amount above $52,850 |
$39,476 to $84,200
Pay $4,543 plus 22% of the amount above $39,475 |
| 24 percent | $84,201 to $160,725
Pay $14,383 plus 24% of the amount above $84,200 |
$168,401 to $321,450
Pay $28,765 plus 24% of the amount above $168,400 |
$84,201 to $160,700
Pay $12,962 plus 24% of the amount above $84,200 |
$84,201 to $160,725
Pay $14,383 plus 24% of the amount above $84,200 |
| 32 percent | $160,726 to $204,100
Pay $32,749 plus 32% of the amount above $160,725 |
$321,451 to $408,200
Pay $65,497 plus 32% of the amount above $321,450 |
$160,701 to $204,100
Pay $31,322 plus 32% of the amount above $160,700 |
$160,726 to $204,100
Pay $32,749 plus 32% of the amount above $160,725 |
| 35 percent | $204,101 to $510,300
Pay $46,629 plus 35% of the amount above $204,100 |
$408,201 to $612,350
Pay $93,257 plus 35% of the amount above $408,200 |
$204,101 to $510,300
Pay $45,210 plus 35% of the amount above $204,100 |
$204,101 to $306,175
Pay $46,629 plus 35% of the amount above $204,100 |
| 37 percent | $510,301 and up
Pay $153,799 plus 37% of the amount above $510,300 |
$612,351 and up
Pay $164,710 plus 37% of the amount above $612,350 |
$510,301 and up
Pay $152,380 plus 37% of the amount above $510,300 |
$306,176 and up
Pay $82,355 plus 37% of the amount above $306,175 |
The additional deduction for aged (65 and older) or the blind is $1,300. It is increased to $1,650 if also unmarried and not a surviving spouse.
2019 Brings One Less Tax Penalty
For those who dare live on the edge without medical insurance, the ACA non-insured penalty will no longer apply for tax filing year 2019. It was still in effect for the 2018 first year of Tax Reform.
The IRS notice for tax year 2019 is full of all kinds of tax details, much more than talked about here. Hopefully the short list provided above helps you get an idea of what to look at for your retirement 2019 tax planning.
Taxes are a big part of the financial picture also. Thanks for the chart and changes for next year. When you are FIRE’d and maybe only working part time or doing projects, you have more control over what tax bracket you may end up in.
Thanks for the comment Arrgo. I probably work tax scenarios more than most people. I am always trying to squeeze more from my retirement money through tax strategy so I try to understand where things are and where they are going. Glad to supply the chart.
Tommy
Hiring professionals in handling some stuff will also benefit you to be confident of good transparency.
I think now a days manual working has been ended and digital solution has appeared. There are many online softwares out in the market that can help making the tax solutions in a much easier manner.
Thanks for the comment Ashwin. You are probably right and I do use software to complete and file my income taxes. That said, I still like to stay knowledgeable of the actual tax changes and make decisions before the software containing changes is available. But then I am a freak who still uses a pencil and budget log book instead of computer spreadsheet to track my retirement spending and income. Different strokes…..
Tommy
I am an tax expert and great knowledge with surety work, i am giving you a traditional way to explore every thing, having all the tax preparation Texas solution with quality work.