IRS Inflation Adjustments for 2019

Every year the IRS adjusts for inflation dozens of tax provisions. These include tax rate schedules, tax tables and cost-of-living adjustments. The IRS announced the adjustments for 2019. These apply to your 2019 taxes. You'll use these numbers to prepare your 2019 tax returns in 2020. Here are the most significant adjustments for 2019.  

Standard Deduction

Every taxpayer gets a standard deduction – an amount you deduct from your income to determine your taxable income. The standard deduction will be going up from $200 to $400 for all taxpayers. This will lower your taxes a bit. If you're a single taxpayer, the standard deduction rises to $12,200 for 2019, up $200 from 2018. If you're married and file jointly (as almost all married couples do) the standard deduction rises to $24,400 for 2019, up $400 from 2018. For heads of households, the standard deduction will be $18,350 for the tax year 2019, up $350.  

Tax Brackets

The United States has a progressive income tax system for individual taxpayers. The higher your income, the higher your tax rate. The Tax Cuts and Jobs Act (TCJA) established a new set of seven tax rates (called tax brackets) that took effect in 2018. These range from 10 percent of taxable income to 37 percent. You move from one bracket to the next only when your taxable income exceeds the bracket amount. The seven tax brackets of the TCJA remain in effect for 2018, were adjusted upward to account for inflation. This will save you taxes. The brackets for 2019 and 2018 are shown in the charts below. You can see, for example, that the lowest 10 percent rate applies to the first $9,525 earned by a single taxpayer in 2018. For 2019, the 10 percent rate applies to the first $9,700 – an increase of $175. For higher-income taxpayers, the savings can be noticeable. As an example, in 2018 a single taxpayer must pay tax at a 32 percent rate on income between $315,000 and $321,450. In 2019, this $6,450 in income is taxed at a much lower 24 percent rate, a savings of $387.    

2019 Personal Income Tax Rates

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2018 Personal Income Tax Brackets & Rates

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Flexible Spending Arrangements (FSA)

Many employers offer their employees health flexible spending arrangements (FSA). Employees can contribute part of their salary to the FSA and then withdraw the money tax-free to pay for health-related expenses not covered by insurance. This can include deductibles, copayments, and coinsurance for the employee's health plan. There is an annual limit of employee contributions to a health FSA.¬† For 2019, the dollar limitation for employee contributions to health flexible spending arrangements is $2,700, up $50 from the limit for 2018.