Each year the Internal Revenue Service and the Social Security Administration announce cost-of-living adjustments, retirement plan contribution limits and other tax-related items. Below are some key numbers for 2019 that are of interest to most taxpayers:
Here’s how much you can put away towards retirement in 2019:
• You can contribute up to $19,000 in your 401(k) and other employer plans. This is an increase of $500 from 2018.
• In 2019 you will be able to save $6,000 in a Roth or Traditional IRA, up from $5,500 in 2018.
Don’t Miss out on the Catch-Up
Catch-up contribution limits are designed for employees age 50 and older. Even if you don’t turn 50 until December 31st, you can make the full catch-up contribution for the year. For 401(k) and other employer plans, you can contribute an additional $6,000. For IRAs, the catch-up limit is $1,000. These are unchanged from 2018.
Roth IRA Funding Eligibility and Deadlines
It’s not too late to consider funding an IRA for 2018. You have until the tax filing deadline of April 15, 2019 to make a contribution to an IRA for the 2018 tax year.
Not sure if you are eligible to contribute to a Roth? If you are single, you must have a modified adjusted gross income (MAGI) under $135,000 to contribute to a Roth IRA for the 2018 tax year, but contributions are reduced starting at $120,000. If you are married filing jointly, your MAGI must be less than $199,000, with reductions beginning at $189,000.
For 2019, the income limits will be higher. A single taxpayer’s MAGI must be under $137,000; contributions are reduced starting at $122,000. For married couples, the MAGI limit is $203,000, with reductions starting at $193,000.
Health Savings Account (HSA). HSAs are tax-exempt accounts that enable you to save money for eligible medical expenses. In order to qualify for an HSA, you must be enrolled in an HSA-qualified high deductible health plan. For 2019, you can contribute up to $3,500 for an individual and $7,000 for a family, slightly higher than the previous year. Persons over age 55 are entitled to an additional annual catch-up contribution of $1,000 in 2019, a number that is unchanged from previous years. Contributions to an HSA may be made up to the April tax filing deadline.
Social Security. Social Security recipients will receive a 2.8% cost-of-living adjustment (COLA) in 2019, higher than the 2% COLA increase in 2018.
Medicare. Monthly premiums for Medicare Part B will be see a slight increase to $135.50 in 2019, up from $134 in 2018. Seniors with modified adjusted gross income over $85,000 (single filers) or $170,000 (joint filers) pay a higher premium, from $189.60 up to $460.50.
Legislation extending the Solar Investment Tax Credit (ITC) was signed into law on December 18th, 2015. This federal solar tax credit currently allows you to deduct 30% of the cost of installing solar electric or solar water heating installations from your federal taxes. The current schedule for the solar tax credit allows for a full 30% tax credit.
2019 is the last year to receive the full credit. The bill extended the credit for both residential and commercial projects through the end of 2019, and then dropped the credit to 26% t in 2020, and 22% in 2021 before dropping permanently to 10% for commercial projects and 0% for residential projects.
Earlier this year, the IRS modified the Investment Tax Credit to allow solar projects to begin construction by the end of the 2019 and still get the 30% credit. Originally it was required that the solar installation must be in service by that date.
By Jamie Ileks, CFP®, CPA