{"id":15902,"date":"2019-05-22T08:00:13","date_gmt":"2019-05-22T13:00:13","guid":{"rendered":"https:\/\/taxprocenter.proconnect.intuit.com\/?p=15902"},"modified":"2019-06-18T10:07:20","modified_gmt":"2019-06-18T15:07:20","slug":"key-tax-developments-for-2019","status":"publish","type":"post","link":"https:\/\/accountants.intuit.com\/taxprocenter\/tax-law-and-news\/key-tax-developments-for-2019\/","title":{"rendered":"Key Tax Developments for 2019"},"content":{"rendered":"

The biggest tax news in recent years was, of course, the enactment of the 2017 Tax Cuts and Jobs Act<\/a> (TCJA). And, while the major changes made by the law applied to the 2018 returns you recently filed for your clients, some \u201cstragglers\u201d will apply for the first time in 2019.<\/p>\n

While the new law changes taking effect in 2019 are not numerous, they are significant.<\/p>\n

Alimony<\/b><\/p>\n

The first \u2014 and, perhaps, most dramatic \u2014 law change is the major shift in the tax treatment of alimony<\/a> payments under divorce of separation agreements executed on or after Jan. 1, 2019 [IRC Sec. 71, 215 repealed]. Under prior law, alimony payments were deductible by the payor spouse and includable in income by the payee. By contrast, under the new law change, the reverse is true: Alimony is not deductible by the payor and is not included in income by the payee.<\/p>\n

Medical Expenses<\/b><\/p>\n

Under longstanding tax law rules, out-of-pocket medical expenses<\/a> were allowed as an itemized deduction to the extent they exceeded 7.5 percent of a taxpayer\u2019s adjusted gross income (AGI). Starting in 2012, a law change raised the deduction floor to 10 percent for most taxpayers, although the 7.5 percent floor continued to apply through 2016 if either the taxpayer or the taxpayer\u2019s spouse had reached age 65 before the close of the year. The TCJA restored the 7.5 percent deduction for all taxpayers for 2017 and 2018 only. As a result, the medical expense deduction floor will reset to 10 percent for all taxpayers for 2019 [IRC Sec. 213(f)].<\/p>\n

Individual Shared Responsibility Penalty<\/b><\/p>\n

A provision enacted by the 2010 Affordable Care Act provides that individuals who do not have minimum essential health coverage must pay a penalty unless they qualify for exemption from the health coverage requirement. However, starting in 2019, the TCJA effectively repeals the individual shared responsibility penalty by reducing the penalty amount to zero [IRC Sec. 5000A(c)].<\/p>\n

To assist individuals in complying with the health coverage requirement, the law requires insurers and self-insured employers to file annual returns with the IRS reporting information for each individual who is provided with minimum essential coverage and to provide written statements to those individuals showing the information to be reported on their tax returns. However, because the individual shared responsibility payment is reduced to zero after 2018, the IRS has indicated that it is studying how the reporting requirements should change, if at all, for future years.<\/p>\n

401(k) Hardship Distributions<\/b><\/p>\n

The 401(k) retirement plan rules allow for distributions to an employee on account of hardship. Under IRS regulations, these distributions have been permitted only in the event of an immediate and heavy financial need of the employee, only in the amount necessary to meet that need, and only to the extent of an employee\u2019s elective contributions (plus earnings). For this purpose, a distribution was deemed necessary to satisfy an immediate and heavy financial need only if the employee first obtained all other available distributions and loans under the plan. Moreover, an employee receiving a hardship distribution was barred from making contributions to the plan for at least six months following the receipt of the distribution. However, a law change made by the Bipartisan Budget Act of 2018 made three important changes to the hardship distribution rules for plan years beginning after 2018:<\/p>\n