Don’t forget to take required minimum distributions (RMDs). Taxpayers who are at least age 70-1/2 must take a 2018 RMD from their IRAs, 401(k) plans or other employer-sponsored retirement plans before year end. Failure to do so can bring a penalty of 50% of the amount of the RMD that should have been withdrawn. If you turned 70-1/2 in 2018, you can delay the first distribution to 4/1/19, but you’ll need to take another RMD before the end of 2019.
With the next tax season rolling up fast, the IRS is reminding taxpayers of a few points. It’s important to keep copies of previous-year returns for at least 3 years, or 7 years if you claim certain security or debt losses. The information on those returns may be needed for current-year filing or to answer IRS questions. Return transcripts can be ordered for free online and by mail or phone, but plan ahead, as delivery can take up to 30 days.
There’s no cause for concern, says the IRS, for individuals making large gifts in the years 2018 through 2025. The Tax Cuts and Jobs Act significantly raised the estate and gift tax exemptions for those years, after which the exemptions are scheduled to drop back to pre-2018 levels. The IRS recently announced that individuals who intend to make large gifts between 2018 and the end of 2025 can do so without concern about losing the tax benefit of the higher exemption level once it decreases after 2025.
The IRS is reminding taxpayers that like-kind exchange tax treatment is now generally limited to exchanges of real property. Effective 1/1/18, exchanges of personal or intangible property such as machinery, equipment, vehicles, artwork, collectibles, and intellectual property generally no longer qualify for nonrecognition of gain as like-kind exchanges. Like-kind exchange treatment now applies only to exchanges of real property held for use in a trade or business or for investment. Real property includes land and generally anything built on or attached to it.
The Tax Cuts and Jobs Act revised family tax credits for 2018. To help taxpayers prepare for the 2019 filing season, the IRS recently issued a reminder about the changes. The law doubled the maximum child tax credit to $2,000 and raised the income limits to claim the credit. A child must also have a valid Social Security number before the due date of the tax return, including extensions. A second credit of up to $500 per dependent is aimed at taxpayers supporting older children and other relatives who don’t qualify for the child tax credit.
Are you considering adopting a child with special needs in 2019? If so, the adoption tax credit will be $14,080. The maximum credit allowed for other adoptions will be the amount of qualified adoption expenses up to $14,080. The credit will begin to phase out for taxpayers with modified adjusted gross income (MAGI) in excess of $211,160 and the phaseout will be complete with a MAGI greater than $251,160.
The Tax Cuts and Jobs Act suspended personal exemptions for 2018–2025, but roughly doubled inflation-adjusted standard deduction amounts. For 2019, the amounts are $24,400 for married joint filers, $12,200 for single filers, $18,350 for heads of households and $12,200 for married couples filing separately. For an individual who can be claimed as a dependent on another’s return, the standard deduction is $1,100, or $350 plus the individual’s earned income, whichever is greater.
If you own a vacation home and both rent it out and use it personally, classification as a rental property might save tax. Expenses attributable to a rental property aren’t subject to the TCJA’s tightened limits on itemized deductions for property tax and mortgage interest, and losses may be deductible. A rental property generally is one you use for 14 days or less, or under 10% of the days you rent it out,
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