In 2018, the Economic Stimulus Act introduced numerous personal and business tax changes. Tax rates, itemized deductions such as those for mortgage interest and SALT (state and local tax deductions) as well as business deductions have significant changes. Some changes are phased in over a varying periods while others revert to pre-ESA rules in 2026.
Many tax planning strategies for both businesses and individuals that worked in the past such as accelerating or deferring income and deductions need to be re-evaluated with the changes from the ESA. Many states have changed or are considering changes to long standing sales tax rules in light of the Wayfair case.
The Internet has changed the tax landscape
The Wayfair case overturned other longstanding court rulings and allows South Dakota to require Wayfair to collect sales taxes on their internet sales even if they have no physical presence in South Dakota. Even thought Wayfair applies specifically to South Dakota sales taxes, other states have now officially adopted the ruling for their sales taxes as well as for their income taxes.
The states are making changes through regulations and legislation with varying filing requirements or exemptions making it even more important to monitor these changes.
The times have changed, some for the better
The optional IRS standard mileage rates for the business use of a vehicle has increased to 58 cents per mile in 2019, up from 54.5 cents per mile in 2018 but the use of the standard mileage rate is more limited starting in 2018. Those change included more limits on deductions for unreimbursed employee business expenses although an exception applies to members of a reserve component of the U.S. armed forces and other limited classes. They may continue to use the 58/54.5 cents per mile rates.
Other changes for 2019 include increases to the wage and self-employment income bases for FICA/OASDI and Medicare taxes. The tax rates (6.2% and 12.4%) are unchanged from 2018 but the maximum amounts of wages and self-employment income have increased to 132,900 from 128,400 for FICA/OASDI. (Medicare has no maximum and is taxed at 1.45% and 2.9%.)
For those making the maximum amounts for FICA/OASDI, this means a tax increase of $344 for a wage earner and $688 for a self-employed person.