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Sunday May 19, 2019

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IRS Releases Inflation Adjusted Items for 2019

Rev. Proc. 2018-57; 2018-49 IRB 1

26 CFR 601.602: Tax forms and instructions.

(Also Part I, §§ 1, 23, 24, 25A, 32, 36B, 42, 45R, 55, 59, 62, 63, 125, 132(f), 135, 137, 146, 147, 148, 152, 179, 199A, 213, 220, 221, 448, 461, 512, 513, 642, 831, 877, 877A, 911, 1274A, 2010, 2032A, 2503, 2523, 4161, 4261, 6033, 6039F, 6323, 6334, 6601, 6651, 6652, 6695, 6698, 6699, 6721, 6722, 7345, 7430, 7702B, 9831; 1.148-5.)

Table of Contents

SECTION 1. PURPOSE

SECTION 2. CHANGES

SECTION 3. 2019 ADJUSTED ITEMS

Code Section
.01Tax Rate Tables1(j)(2)(A)-(D)
.02Unearned Income of Minor Children Taxed as if Parent's Income ("Kiddie Tax")1(g)
.03Maximum Capital Gains Rate1(h)
.04Adoption Credit23
.05Child Tax Credit24
.06Lifetime Learning Credit25A
.07Earned Income Credit32
.08Refundable Credit for Coverage Under a Qualified Health Plan36B(f)(2)(B)
.09Rehabilitation Expenditures Treated as Separate New Building42(e)
.10Low-Income Housing Credit42(h)
.11Employee Health Insurance Expense of Small Employers45R
.12Exemption Amounts for Alternative Minimum Tax55
.13Alternative Minimum Tax Exemption for a Child Subject to the "Kiddie Tax"59(j)
.14Certain Expenses of Elementary and Secondary School Teachers62(a)(2)(D)
.15Transportation Mainline Pipeline Construction Industry Optional Expense Substantiation Rules for Payments to Employees Under Accountable Plans62(c)
.16Standard Deduction63
.17Cafeteria Plans125
.18Qualified Transportation Fringe Benefit132(f)
.19Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher Education Expenses135
.20Adoption Assistance Programs137
.21Private Activity Bonds Volume Cap146(d)
.22Loan Limits on Agricultural Bonds147(c)(2)
.23General Arbitrage Rebate Rules148(f)
.24Safe Harbor Rules for Broker Commissions on Guaranteed Investment Contracts or Investments Purchased for a Yield Restricted Defeasance Escrow148
.25Gross Income Limitation for a Qualifying Relative152(d)(1)(B)
.26Election to Expense Certain Depreciable Assets179
.27Qualified Business Income199A
.28Eligible Long-Term Care Premiums213(d)(10)
.29Medical Savings Accounts220
.30Interest on Education Loans1(j)(2)(A)-(D)
.31Tax Rate Tables1(j)(2)(A)-(D)
.32Tax Rate Tables1(j)(2)(A)-(D)
.33Tax Rate Tables1(j)(2)(A)-(D)
.34Tax Rate Tables1(j)(2)(A)-(D)
.35Tax Rate Tables1(j)(2)(A)-(D)
.36Tax Rate Tables1(j)(2)(A)-(D)
.37Tax Rate Tables1(j)(2)(A)-(D)
.38Tax Rate Tables1(j)(2)(A)-(D)
.39Tax Rate Tables1(j)(2)(A)-(D)
.40Tax Rate Tables1(j)(2)(A)-(D)
.41Tax Rate Tables1(j)(2)(A)-(D)
.42Tax Rate Tables1(j)(2)(A)-(D)
.43Tax Rate Tables1(j)(2)(A)-(D)
.44Tax Rate Tables1(j)(2)(A)-(D)
.45Tax Rate Tables1(j)(2)(A)-(D)
.46Tax Rate Tables1(j)(2)(A)-(D)
.47Tax Rate Tables1(j)(2)(A)-(D)
.48Tax Rate Tables1(j)(2)(A)-(D)
.49Tax Rate Tables1(j)(2)(A)-(D)
.50Tax Rate Tables1(j)(2)(A)-(D)
.51Tax Rate Tables1(j)(2)(A)-(D)
.52Tax Rate Tables1(j)(2)(A)-(D)
.53Tax Rate Tables1(j)(2)(A)-(D)
.54Tax Rate Tables1(j)(2)(A)-(D)
.55Tax Rate Tables1(j)(2)(A)-(D)
.56Tax Rate Tables1(j)(2)(A)-(D)
.57Tax Rate Tables1(j)(2)(A)-(D)
.58Tax Rate Tables1(j)(2)(A)-(D)
.59Tax Rate Tables1(j)(2)(A)-(D)
.60Tax Rate Tables1(j)(2)(A)-(D)
.61Tax Rate Tables1(j)(2)(A)-(D)
.62Tax Rate Tables1(j)(2)(A)-(D)
Code Section

.01

Tax Rate Tables

1(j)(2)(A)-(D)

.02

Unearned Income of Minor Children Taxed as if Parent's Income ("Kiddie Tax")

1(g)

.03

Maximum Capital Gains Rate

1(h)

.04

Adoption Credit

23

.05

Child Tax Credit

24

.06

Lifetime Learning Credit

25A

.07

Earned Income Credit

32

.08

Refundable Credit for Coverage Under a Qualified Health Plan

36B(f)(2)(B)

.09

Rehabilitation Expenditures Treated as Separate New Building

42(e)

.10

Low-Income Housing Credit

42(h)

.11

Employee Health Insurance Expense of Small Employers

45R

.12

Exemption Amounts for Alternative Minimum Tax

55

.13

Alternative Minimum Tax Exemption for a Child Subject to the "Kiddie Tax"

59(j)

.14

Certain Expenses of Elementary and Secondary School Teachers

62(a)(2)(D)

.15

Transportation Mainline Pipeline Construction Industry Optional Expense Substantiation Rules for Payments to Employees Under Accountable Plans

62(c)

.16

Standard Deduction

63

.17

Cafeteria Plans

125

.18

Qualified Transportation Fringe Benefit

132(f)

.19

Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher Education Expenses

135

.20

Adoption Assistance Programs

137

.21

Private Activity Bonds Volume Cap

146(d)

.22

Loan Limits on Agricultural Bonds

147(c)(2)

.23

General Arbitrage Rebate Rules

148(f)

.24

Safe Harbor Rules for Broker Commissions on Guaranteed Investment Contracts or Investments Purchased for a Yield Restricted Defeasance Escrow

148

.25

Gross Income Limitation for a Qualifying Relative

152(d)(1)(B)

.26

Election to Expense Certain Depreciable Assets

179

.27

Qualified Business Income

199A

.28

Eligible Long-Term Care Premiums

213(d)(10)

.29

Medical Savings Accounts

220

.30

Interest on Education Loans

221

.31

Limitation on Use of Cash Method of Accounting

448

.32

Threshold for Excess Business Loss

461(l)

.33

Treatment of Dues Paid to Agricultural or Horticultural Organizations

512(d)

.34

Insubstantial Benefit Limitations for Contributions Associated With Charitable Fund-Raising Campaigns

513(h)

.35

Special Rules for Credits and Deductions

642

.36

Tax on Insurance Companies Other than Life Insurance Companies

831

.37

Expatriation to Avoid Tax

877

.38

Tax Responsibilities of Expatriation

877A

.39

Foreign Earned Income Exclusion

911

.40

Debt Instruments Arising Out of Sales or Exchanges

1274A

.41

Unified Credit Against Estate Tax

2010

.42

Valuation of Qualified Real Property in Decedent's Gross Estate

2032A

.43

Annual Exclusion for Gifts

2503; 2523

.44

Tax on Arrow Shafts

4161

.45

Passenger Air Transportation Excise Tax

4261

.46

Reporting Exception for Certain Exempt Organizations with Nondeductible Lobbying Expenditures

6033(e)(3)

.47

Notice of Large Gifts Received from Foreign Persons

6039F

.48

Persons Against Whom a Federal Tax Lien Is Not Valid

6323

.49

Property Exempt from Levy

6334(a)

.50

Exempt Amount of Wages, Salary, or Other Income

6334(d)

.51

Interest on a Certain Portion of the Estate Tax Payable in Installments

6601(j)

.52

Failure to File Tax Return

6651

.53

Failure to File Certain Information Returns, Registration Statements, etc.

6652

.54

Other Assessable Penalties With Respect to the Preparation of Tax Returns for Other Persons

6695

.55

Failure to File Partnership Return

6698

.56

Failure to File S Corporation Return

6699

.57

Failure to File Correct Information Returns

6721

.58

Failure to Furnish Correct Payee Statements

6722

.59

Revocation or Denial of Passport in Case of Certain Tax Delinquencies

7345

.60

Attorney Fee Awards

7430

.61

Periodic Payments Received Under Qualified Long-Term Care Insurance Contracts or Under Certain Life Insurance Contracts

7702B(d)

.62

Qualified Small Employer Health Reimbursement Arrangement

9831

SECTION 4. EFFECTIVE DATE

SECTION 5. DRAFTING INFORMATION

SECTION 1. PURPOSE

This revenue procedure sets forth inflation-adjusted items for 2019 for various provisions of the Internal Revenue Code of 1986 (Code) as amended as of November 15, 2018. To the extent amendments to the Code are enacted for 2019 after November 15, 2018, taxpayers should consult additional guidance to determine whether these adjustments remain applicable for 2019.

SECTION 2. CHANGES

.01 Section 11001(a)(5) of An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, Pub. L. 115-97, 131 Stat. 2504 (the Act), adds § 1(j)(5), which provides a temporary modification to the dollar amounts in § 1(h)(1)(B) and (C) for taxable years beginning after December 31, 2017, and before January 1, 2026. Section 1(j)(5)(B)(i) provides that under §1(h)(1)(B)(i) the maximum zero rate amount is $77,200 for a joint return or surviving spouse, $51,700 for a head of household, half of the amount for a joint return for an individual, and $2,600 for an estate or trust. Section 1(j)(5)(B)(ii) provides that under §1(h)(1)(C)(ii)(I) the maximum 15% rate amount is $479,000 for a joint return or surviving spouse (half of this amount for a married individual filing a separate return), $452,400 for a head of household, $425,800 in the case of any other individual (other than an estate or trust), and $12,700 for an estate or trust. These amounts are adjusted for inflation for taxable years beginning after December 31, 2018.

.02 Section 11022(a) of the Act adds § 24(h), which provides special rules for taxable years beginning after December 31, 2017, and before January 1, 2026. Section 24(h) provides that the value used in § 24(d)(1)(A) to determine the amount of child tax credit under § 24 that may be refundable is $1,400. The $1,400 amount is adjusted for inflation for taxable years beginning after December 31, 2018.

.03 Section 11041 of the Act amends § 151(d)(5) to provide a temporary set dollar amount of zero for the personal exemption deduction for taxable years beginning after December 31, 2017, and before January 1, 2026. However, Notice 2018-70, 2018-38 I.R.B. 441, notifies taxpayers that the Department of the Treasury and the Internal Revenue Service intend to issue proposed regulations to clarify that the reduction of the exemption amount to zero in § 151(d)(5)(A) for taxable years 2018 through 2025 does not apply to the gross income limitation in the definition of a qualifying relative in § 152(d)(1)(B). Thus, the § 151(d) exemption amount referenced in § 152(d)(1)(B) will be treated as $4,150, as adjusted for inflation, for taxable years in which the §151(d)(5)(A) exemption amount is zero.

.04 Section 13101 of the Act amends § 179(b)(6) to provide that the $25,000 limitation of the cost of any sport utility vehicle under § 179(b)(5)(A) is adjusted for inflation for taxable years beginning after December 31, 2018.

.05 Section 11011 of the Act adds § 199A, which provides in part that if for a taxable year a taxpayer has income less than the sum of the threshold amount plus $50,000 ($100,000 for joint returns), then any specified service trade or business of the taxpayer shall not fail to be treated as a qualified trade or business due to § 199A(d)(1)(A). Section 199A(e)(2)(A) defines the threshold amount as $157,500. This $157,500 amount is adjusted for inflation for taxable years beginning after December 31, 2018.

.06 Section 13102 of the Act amends § 448(c) to provide that a corporation or partnership meets the gross receipts tests for any taxable year if the average annual gross receipts of such entity for the 3-taxable-year period ending with the taxable year which precedes such taxable year does not exceed $25,000,000. The $25,000,000 amount is adjusted for inflation for taxable years beginning after December 31, 2018.

.07 Section 11012 of the Act adds § 461(l) to provide that a taxpayer's excess business loss for the taxable year is the excess, if any, of the taxpayer's aggregate deductions attributable to trades or businesses of the taxpayer (determined without regard to the limitation of the provision) over the sum of the taxpayer's aggregate gross income or gain attributable to such trades or businesses, plus $250,000 (twice this amount for joint returns). The $250,000 amount under § 461(l)(3)(A)(ii)(II) is adjusted for inflation for taxable years beginning after December 31, 2018.

.08 Section 11041(b) of the Act adds § 642(b)(2)(C)(iii), which provides that in years when the personal exemption amount under § 151(d) is zero, § 642(b)(2)(C)(i) shall be applied by substituting $4,150 for the exemption amount under § 151(d). The $4,150 amount is adjusted for inflation for taxable years beginning after December 31, 2018.

.09 Section 11002(d)(10) of the Act amended § 1274A(d)(2) to change the calculation of the inflation-adjusted amounts for qualified debt instruments and cash method debt instruments for taxable years beginning after December 31, 2017. In prior years, the inflation-adjusted amounts under § 1274A have been published in a separate revenue ruling. Because of the change to the calculation of the inflation-adjusted amounts under § 1274A, these amounts will be included in this revenue procedure and will no longer be published in a separate revenue ruling. For inflation-adjusted amounts prior to January 1, 2019, see Rev. Rul. 2018-11, 2018-18 I.R.B. 518.

.10 Section 11081 of the Act amends § 5000A to provide that the applicable dollar amount used to determine the penalty under § 5000A(c) for failure to maintain minimum essential coverage is $0 for taxable years beginning after December 31, 2018. Accordingly, this amount is not included in this revenue procedure.

.11 Section 11041(d) of the Act adds § 6334(d)(4), which provides that in taxable years in which the personal exemption amount under § 151(d) is zero, the term "exempt amount" means an amount equal to (i) the sum of the amount determined under § 6334(d)(4)(B) and the standard deduction, divided by (ii) 52. The amount determined under § 6334(d)(4)(B) is $4,150 multiplied by the number of the taxpayer's dependents for the taxable year in which the levy occurs. The $4,150 amount is adjusted for inflation for taxable years beginning after December 31, 2018.

SECTION 3. 2019 ADJUSTED ITEMS

.01 Tax Rate Tables. For taxable years beginning in 2019, the tax rate tables under § 1 are as follows:

TABLE 1 — Section 1(j)(2)(A) — Married Individuals Filing Joint Returns and Surviving Spouses

If Taxable Income Is:

The Tax Is:

Not over $19,400

10% of the taxable income

Over $19,400 but not over $78,950

$1,940 plus 12% of the excess over $19,400

Over $78,950 but not over $168,400

$9,086 plus 22% of the excess over $78,950

Over $168,400 but not over $321,450

$28,765 plus 24% of the excess over $168,400

Over $321,450 but not over $408,200

$65,497 plus 32% of the excess over $321,450

Over $408,200 but not over $612,350

$93,257 plus 35% of the excess over $408,200

Over $612,350

$164,709.50 plus 37% of the excess over $612,350

TABLE 2 — Section 1(j)(2)(B) — Heads of Households

If Taxable Income Is:

The Tax Is:

Not over $13,850

10% of the taxable income

Over $13,850 but not over $52,850

$1,385 plus 12% of the excess over $13,850

Over $52,850 but not over $84,200

$6,065 plus 22% of the excess over $52,850

Over $84,200 but not over $160,700

$12,962 plus 24% of the excess over $84,200

Over $160,700 but not over $204,100

$31,322 plus 32% of the excess over $160,700

Over $204,100 but not over $510,300

$45,210 plus 35% of the excess over $204,100

Over $510,300

$152,380 plus 37% of the excess over $510,300

TABLE 3 — Section 1(j)(2)(C) — Unmarried Individuals (other than Surviving Spouses and Heads of Households)

If Taxable Income Is:

The Tax Is:

Not over $9,700

10% of the taxable income

Over $9,700 but not over $39,475

$970 plus 12% of the excess over $9,700

Over $39,475 but not over $84,200

$4,543 plus 22% of the excess over $39,475

Over $84,200 but not over $160,725

$14,382.50 plus 24% of the excess over $84,200

Over $160,725 but not over $204,100

$32,748.50 plus 32% of the excess over $160,725

Over $204,100 but not over $510,300

$46,628.50 plus 35% of the excess over $204,100

Over $510,300

$153,798.50 plus 37% of the excess over $510,300

TABLE 4 — Section 1(j)(2)(D) — Married Individuals Filing Separate Returns

If Taxable Income Is:

The Tax Is:

Not over $9,700

10% of the taxable income

Over $9,700 but not over $39,475

$970 plus 12% of the excess over $9,700

Over $39,475 but not over $84,200

$4,543 plus 22% of the excess over $39,475

Over $84,200 but not over $160,725

$14,382.50 plus 24% of the excess over $84,200

Over $160,725 but not over $204,100

$32,748.50 plus 32% of the excess over $160,725

Over $204,100 but not over $306,175

$46,628.50 plus 35% of the excess over $204,100

Over $306,175

$82,354.75 plus 37% of the excess over $306,175

TABLE 5 — Section 1(j)(2)(E) — Estates and Trusts

If Taxable Income Is:

The Tax Is:

Not over $2,600

10% of the taxable income

Over $2,600 but not over $9,300

$260 plus 24% of the excess over $2,600

Over $9,300 but not over $12,750

$1,868 plus 35% of the excess over $9,300

Over $12,750

$3,075.50 plus 37% of the excess over $12,750

.02 Unearned Income of Minor Children Taxed as if Parent's Income (the "Kiddie Tax"). For taxable years beginning in 2019, the amount in § 1(g)(4)(A)(ii)(I), which is used to reduce the net unearned income reported on the child's return that is subject to the "kiddie tax," is $1,100. This $1,100 amount is the same as the amount provided in §63(c)(5)(A), as adjusted for inflation. The same $1,100 amount is used for purposes of § 1(g)(7) (that is, to determine whether a parent may elect to include a child's gross income in the parent's gross income and to calculate the "kiddie tax"). For example, one of the requirements for the parental election is that a child's gross income is more than the amount referenced in § 1(g)(4)(A)(ii)(I) but less than 10 times that amount; thus, a child's gross income for 2019 must be more than $1,100 but less than $11,000.

.03 Maximum Capital Gains Rate. For taxable years beginning in 2019, the Maximum Zero Rate Amount under § 1(h)(1)(B)(i) is $78,750 in the case of a joint return or surviving spouse, $52,750 in the case of an individual who is a head of household (§ 2(b)), $39,375 in the case of any other individual (other than an estate or trust), and $2,650 in the case of an estate or trust. The Maximum 15-percent Rate Amount under § 1(h)(C)(ii)(l) is $488,850 in the case of a joint return or surviving spouse (1?2 such amount in the case of a married individual filing a separate return), $461,700 in the case of an individual who is the head of a household (§ 2(b)), $434,550 in the case of any other individual (other than an estate or trust), and $12,950 in the case of an estate or trust.

.04 Adoption Credit. For taxable years beginning in 2019, under § 23(a)(3) the credit allowed for an adoption of a child with special needs is $14,080. For taxable years beginning in 2019, under § 23(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $14,080. The available adoption credit begins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $211,160 and is completely phased out for taxpayers with modified adjusted gross income of $251,160 or more. (See section 3.20 for the adjusted items relating to adoption assistance programs.)

.05 Child Tax Credit. For taxable years beginning in 2019, the value used in §24(d)(1)(A) to determine the amount of credit under § 24 that may be refundable is $1,400.

.06 Lifetime Learning Credit. For taxable years beginning in 2019, a taxpayer's modified adjusted gross income in excess of $58,000 ($116,000 for a joint return) is used to determine the reduction under § 25A(d)(2) in the amount of the Lifetime Learning Credit otherwise allowable under § 25A(a)(2).

.07 Earned Income Credit.

(1) In general. For taxable years beginning in 2019, the following amounts are used to determine the earned income credit under § 32(b). The "earned income amount" is the amount of earned income at or above which the maximum amount of the earned income credit is allowed. The "threshold phaseout amount" is the amount of adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The "completed phaseout amount" is the amount of adjusted gross income (or, if greater, earned income) at or above which no credit is allowed. The threshold phaseout amounts and the completed phaseout amounts shown in the table below for married taxpayers filing a joint return include the increase provided in § 32(b)(3)(B)(i), as adjusted for inflation for taxable years beginning in 2019.

Number of Qualifying Children

Item

One

Two

Three or More

None

Earned Income Amount

$10,370

$14,570

$14,570

$6,920

Maximum Amount of Credit

$3,526

$5,828

$6,557

$529

Threshold Phaseout Amount (Single, Surviving Spouse, or Head of Household)

$19,030

$19,030

$19,030

$8,650

Completed Phaseout Amount (Single, Surviving Spouse, or Head of Household)

$41,094

$46,703

$50,162

$15,570

Threshold Phaseout Amount (Married Filing Jointly)

$24,820

$24,820

$24,820

$14,450

Completed Phaseout Amount (Married Filing Jointly)

$46,884

$52,493

$55,952

$21,370

The instructions for the Form 1040 series provide tables showing the amount of the earned income credit for each type of taxpayer.

(2) Excessive Investment Income. For taxable years beginning in 2019, the earned income tax credit is not allowed under § 32(i)(1) if the aggregate amount of certain investment income exceeds $3,600.

.08 Refundable Credit for Coverage Under a Qualified Health Plan. For taxable years beginning in 2019, the limitation on tax imposed under § 36B(f)(2)(B) for excess advance credit payments is determined using the following table:

If the household income (expressed as a percent of the poverty line) is:

The limitation amount for unmarried individuals (other than surviving spouses and heads of households) is:

The limitation amount for all other taxpayers is:

Less than 200%

$300

$600

At least 200% but less than 300%

$800

$1,600

At least 300% but less than 400%

$1,325

$2,650

.09 Rehabilitation Expenditures Treated as Separate New Building. For calendar year 2019, the per low-income unit qualified basis amount under § 42(e)(3)(A)(ii)(II) is $7,000.

.10 Low-Income Housing Credit. For calendar year 2019, the amount used under § 42(h)(3)(C)(ii) to calculate the State housing credit ceiling for the low-income housing credit is the greater of (1) $2.75625 multiplied by the State population, or (2) $3,166,875.

.11 Employee Health Insurance Expense of Small Employers. For taxable years beginning in 2019, the dollar amount in effect under § 45R(d)(3)(B) is $27,100. This amount is used under § 45R(c) for limiting the small employer health insurance credit and under § 45R(d)(1)(B) for determining who is an eligible small employer for purposes of the credit.

.12 Exemption Amounts for Alternative Minimum Tax. For taxable years beginning in 2019, the exemption amounts under § 55(d)(1) are:

Joint Returns or Surviving Spouses

$111,700

Unmarried Individuals (other than Surviving Spouses)

$71,700

Married Individuals Filing Separate Returns

$55,850

Estates and Trusts

$25,000

For taxable years beginning in 2019, under § 55(b)(1), the excess taxable income above which the 28 percent tax rate applies is:

Married Individuals Filing Separate Returns

$97,400

Joint Returns, Unmarried Individuals (other than surviving spouses), and Estates and Trusts

$194,800

For taxable years beginning in 2019, the amounts used under § 55(d)(3) to determine the phaseout of the exemption amounts are:

Joint Returns or Surviving Spouses

$1,020,600

Unmarried Individuals (other than Surviving Spouses

$510,300

Married Individuals Filing Separate Returns

$510,300

Estates and Trusts

$83,500

.13 Alternative Minimum Tax Exemption for a Child Subject to the "Kiddie Tax." For taxable years beginning in 2019, for a child to whom the § 1(g) "kiddie tax" applies, the exemption amount under §§ 55 and §59(j) for purposes of the alternative minimum tax under § 55 may not exceed the sum of (1) the child's earned income for the taxable year, plus (2) $7,750.

.14 Certain Expenses of Elementary and Secondary School Teachers. For taxable years beginning in 2019, under § 62(a)(2)(D) the amount of the deduction allowed under § 162 that consists of expenses paid or incurred by an eligible educator in connection with books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment (including related software and services) and other equipment, and supplementary materials used by the eligible educator in the classroom is $250.

.15 Transportation Mainline Pipeline Construction Industry Optional Expense Substantiation Rules for Payments to Employees Under Accountable Plans. For calendar year 2019, an eligible employer may pay certain welders and heavy equipment mechanics an amount of up to $18 per hour for rig-related expenses that are deemed substantiated under an accountable plan if paid in accordance with Rev. Proc. 2002-41, 2002-1 C.B. 1098. If the employer provides fuel or otherwise reimburses fuel expenses, up to $11 per hour is deemed substantiated if paid under Rev. Proc. 2002-41.

.16 Standard Deduction.

(1) In general. For taxable years beginning in 2019, the standard deduction amounts under § 63(c)(2) are as follows:

Filing Status

Standard Deduction

Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(j)(2)(A))

$24,400

Heads of Households (§ 1(j)(2)(B))

$18,350

Unmarried Individuals (other than Surviving Spouses and Heads of Households) (§ 1(j)(2)(C))

$12,200

Married Individuals Filing Separate Returns (§ 1(j)(2)(D))

$12,200

(2) Dependent. For taxable years beginning in 2019, the standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of (1) $1,100, or (2) the sum of $350 and the individual's earned income.

(3) Aged or blind. For taxable years beginning in 2019, the additional standard deduction amount under § 63(f) for the aged or the blind is $1,300. The additional standard deduction amount is increased to $1,650 if the individual is also unmarried and not a surviving spouse.

.17 Cafeteria Plans. For taxable years beginning in 2019, the dollar limitation under § 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements is $2,700.

.18 Qualified Transportation Fringe Benefit. For taxable years beginning in 2019, the monthly limitation under § 132(f)(2)(A) regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $265. The monthly limitation under § 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $265.

.19 Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher Education Expenses. For taxable years beginning in 2019, the exclusion under § 135, regarding income from United States savings bonds for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $121,600 for joint returns and $81,100 for all other returns. The exclusion is completely phased out for modified adjusted gross income of $151,600 or more for joint returns and $96,100 or more for all other returns.

.20 Adoption Assistance Programs. For taxable years beginning in 2019, under § 137(a)(2), the amount that can be excluded from an employee's gross income for the adoption of a child with special needs is $14,080. For taxable years beginning in 2019, under § 137(b)(1) the maximum amount that can be excluded from an employee's gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $14,080. The amount excludable from an employee's gross income begins to phase out under § 137(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $211,160 and is completely phased out for taxpayers with modified adjusted gross income of $251,160 or more. (See section 3.04 of this revenue procedure for the adjusted items relating to the adoption credit.)

.21 Private Activity Bonds Volume Cap. For calendar year 2019, the amounts used under § 146(d) to calculate the State ceiling for the volume cap for private activity bonds is the greater of (1) $105 multiplied by the State population, or (2) $316,745,000.

.22 Loan Limits on Agricultural Bonds. For calendar year 2019, the loan limit amount on agricultural bonds under § 147(c)(2)(A) for first-time farmers is $543,800.

.23 General Arbitrage Rebate Rules. For bond years ending in 2019, the amount of the computation credit determined under the permission to rely on § 1.148-3(d)(4) of the proposed Income Tax Regulations is $1,730.

.24 Safe Harbor Rules for Broker Commissions on Guaranteed Investment Contracts or Investments Purchased for a Yield Restricted Defeasance Escrow. For calendar year 2019, under § 1.148-5(e)(2)(iii)(B)(1), a broker's commission or similar fee for the acquisition of a guaranteed investment contract or investments purchased for a yield restricted defeasance escrow is reasonable if (1) the amount of the fee that the issuer treats as a qualified administrative cost does not exceed the lesser of (A) $41,000, and (B) 0.2 percent of the computational base (as defined in § 1.148-5(e)(2)(iii)(B)(2)) or, if more, $4,000; and (2) for any issue, the issuer does not treat more than $115,000 in brokers' commissions or similar fees as qualified administrative costs for all guaranteed investment contracts and investments for yield restricted defeasance escrows purchased with gross proceeds of the issue.

.25 Gross Income Limitation for a Qualifying Relative. For taxable years beginning in 2019, the exemption amount referenced in § 152(d)(1)(B) is $4,200.

.26 Election to Expense Certain Depreciable Assets. For taxable years beginning in 2019, under § 179(b)(1), the aggregate cost of any § 179 property that a taxpayer elects to treat as an expense cannot exceed $1,020,000 and under § 179(b)(5)(A), the cost of any sport utility vehicle that may be taken into account under § 179 cannot exceed $25,500. Under § 179(b)(2), the $2,550,000 limitation is reduced (but not below zero) by the amount the cost of § 179 property placed in service during the 2019 taxable year exceeds $2,550,000.

.27 Qualified Business Income. For taxable years beginning in 2019, the threshold amount under § 199A(e)(2) is $321,400 for married filing joint returns, $160,725 for married filing separate returns, and $160,700 for single and head of household returns.

.28 Eligible Long-Term Care Premiums. For taxable years beginning in 2019, the limitations under § 213(d)(10), regarding eligible long-term care premiums includible in the term "medical care," are as follows:

Attained Age Before the Close of the Taxable Year

Limitation on Premiums

40 or less

$420

More than 40 but not more than 50

$790

More than 50 but not more than 60

$1,580

More than 60 but not more than 70

$4,220

More than 70

$5,270

.29 Medical Savings Accounts.

(1) Self-only coverage. For taxable years beginning in 2019, the term "high deductible health plan" as defined in § 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,350 and not more than $3,500, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,650.

(2) Family coverage. For taxable years beginning in 2019, the term "high deductible health plan" means, for family coverage, a health plan that has an annual deductible that is not less than $4,650 and not more than $7,000, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,550.

.30 Interest on Education Loans. For taxable years beginning in 2019, the $2,500 maximum deduction for interest paid on qualified education loans under § 221 begins to phase out under § 221(b)(2)(B) for taxpayers with modified adjusted gross income in excess of $70,000 ($140,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $85,000 or more ($170,000 or more for joint returns).

.31 Limitation on Use of Cash Method of Accounting. For taxable years beginning in 2019, a corporation or partnership meets the gross receipts test of § 448(c) for any taxable year if the average annual gross receipts of such entity for the 3-taxable-year period ending with the taxable year which precedes such taxable year does not exceed $26,000,000.

.32 Threshold for Excess Business Loss. For taxable years beginning in 2019, in determining a taxpayer's excess business loss, the amount under § 461(l)(3)(A)(ii)(II) is $255,000 ($510,000 for joint returns).

.33 Treatment of Dues Paid to Agricultural or Horticultural Organizations. For taxable years beginning in 2019, the limitation under § 512(d)(1), regarding the exemption of annual dues required to be paid by a member to an agricultural or horticultural organization, is $169.

.34 Insubstantial Benefit Limitations for Contributions Associated with Charitable Fund-Raising Campaigns.

(1) Low cost article. For taxable years beginning in 2019, for purposes of defining the term "unrelated trade or business" for certain exempt organizations under §513(h)(2), "low cost articles" are articles costing $11.10 or less.

(2) Other insubstantial benefits. For taxable years beginning in 2019, under § 170, the $5, $25, and $50 guidelines in section 3 of Rev. Proc. 90-12, 1990-1 C.B. 471 (as amplified by Rev. Proc. 92-49, 1992-1 C.B. 987, and modified by Rev. Proc. 92-102, 1992-2 C.B. 579), for the value of insubstantial benefits that may be received by a donor in return for a contribution, without causing the contribution to fail to be fully deductible, are $11.10, $55.50, and $111, respectively.

.35 Special Rules for Credits and Deductions. For taxable years beginning in 2019, the amount of the deduction under § 642(b)(2)(C)(i) is $4,200.

.36 Tax on Insurance Companies Other than Life Insurance Companies. For taxable years beginning in 2019, under § 831(b)(2)(A)(i) the amount of the limit on net written premiums or direct written premiums (whichever is greater) is $2,300,000 to elect the alternative tax for certain small companies under § 831(b)(1) to be taxed only on taxable investment income.

.37 Expatriation to Avoid Tax. For calendar year 2019, under § 877A(g)(1)(A), unless an exception under § 877A(g)(1)(B) applies, an individual is a covered expatriate if the individual's "average annual net income tax" under § 877(a)(2)(A) for the five taxable years ending before the expatriation date is more than $168,000.

.38 Tax Responsibilities of Expatriation. For taxable years beginning in 2019, the amount that would be includible in the gross income of a covered expatriate by reason of § 877A(a)(1) is reduced (but not below zero) by $725,000.

.39 Foreign Earned Income Exclusion. For taxable years beginning in 2019, the foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $105,900.

.40 Debt Instruments Arising Out of Sales or Exchanges. For calendar year 2019, a qualified debt instrument under § 1274A(b) has stated principal that does not exceed $5,944,600, and a cash method debt instrument under § 1274A(c)(2) has stated principal that does not exceed $4,246,200.

.41 Unified Credit Against Estate Tax. For an estate of any decedent dying in calendar year 2019, the basic exclusion amount is $11,400,000 for determining the amount of the unified credit against estate tax under § 2010.

.42 Valuation of Qualified Real Property in Decedent's Gross Estate. For an estate of a decedent dying in calendar year 2019, if the executor elects to use the special use valuation method under § 2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use § 2032A for purposes of the estate tax cannot exceed $1,160,000.

.43 Annual Exclusion for Gifts.

(1) For calendar year 2019, the first $15,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts under §2503 made during that year.

(2) For calendar year 2019, the first $155,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts under §§ 2503 and §2523(i)(2) made during that year.

.44 Tax on Arrow Shafts. For calendar year 2019, the tax imposed under § 4161(b)(2)(A) on the first sale by the manufacturer, producer, or importer of any shaft of a type used in the manufacture of certain arrows is $0.52 per shaft.

.45 Passenger Air Transportation Excise Tax. For calendar year 2019, the tax under §4261(b)(1) on the amount paid for each domestic segment of taxable air transportation is $4.20. For calendar year 2019, the tax under § 4261(c)(1) on any amount paid (whether within or without the United States) for any international air transportation, if the transportation begins or ends in the United States, generally is $18.60. Under § 4261(c)(3), however, a lower amount applies under § 4261(c)(1) to a domestic segment beginning or ending in Alaska or Hawaii, and the tax applies only to departures. For calendar year 2019, the rate is $9.30.

.46 Reporting Exception for Certain Exempt Organizations with Nondeductible Lobbying Expenditures. For taxable years beginning in 2019, the annual per person, family, or entity dues limitation to qualify for the reporting exception under § 6033(e)(3) (and section 5.05 of Rev. Proc. 98-19, 1998-1 C.B. 547), regarding certain exempt organizations with nondeductible lobbying expenditures, is $117 or less.

.47 Notice of Large Gifts Received from Foreign Persons. For taxable years beginning in 2019, § 6039F authorizes the Treasury Department and the Internal Revenue Service to require recipients of gifts from certain foreign persons to report these gifts if the aggregate value of gifts received in the taxable year exceeds $16,388.

.48 Persons Against Whom a Federal Tax Lien Is Not Valid. For calendar year 2019, a federal tax lien is not valid against (1) certain purchasers under § 6323(b)(4) who purchased personal property in a casual sale for less than $1,590, or (2) a mechanic's lienor under § 6323(b)(7) who repaired or improved certain residential property if the contract price with the owner is not more than $7,970.

.49 Property Exempt from Levy. For calendar year 2019, the value of property exempt from levy under § 6334(a)(2) (fuel, provisions, furniture, and other household personal effects, as well as arms for personal use, livestock, and poultry) cannot exceed $9,540. The value of property exempt from levy under § 6334(a)(3) (books and tools necessary for the trade, business, or profession of the taxpayer) cannot exceed $4,770.

.50 Exempt Amount of Wages, Salary, or Other Income. For taxable years beginning in 2019, the dollar amount used to calculate the amount determined under §6334(d)(4)(B) is $4,200.

.51 Interest on a Certain Portion of the Estate Tax Payable in Installments. For an estate of a decedent dying in calendar year 2019, the dollar amount used to determine the "2-percent portion" (for purposes of calculating interest under § 6601(j)) of the estate tax extended as provided in § 6166 is $1,550,000.

.52 Failure to File Tax Return. In the case of any return required to be filed in 2019, the amount of the addition to tax under § 6651(a) for failure to file a tax return within 60 days of the due date of such return (determined with regard to any extensions of time for filing) shall not be less than the lesser of $215 or 100 percent of the amount required to be shown as tax on such returns.

.53 Failure to File Certain Information Returns, Registration Statements, etc. For returns required to be filed in 2019, the penalty amounts under § 6652(c) are:

(1) for failure to file a return required under § 6033(a)(1) (relating to returns by exempt organization) or § 6012(a)(6) (relating to returns by political organizations):

Scenario

Daily Penalty

Maximum Penalty

Organization (§ 6652(c)(1)(A))

$20

Lesser of $10,500 or 5% of gross receipts of the organization for the year.

Organization with gross receipts exceeding $1,067,000 (§ 6652(c)(1)(A))

$105

$53,000

Managers (§ 6652(c)(1)(B))

$10

$5,000

Public inspection of annual returns and reports (§ 6652(c)(1)(C))

$20

$10,500

Public inspection of applications for exemption and notice of status (§ 6652(c)(1)(D))

$20

No Limits

(2) for failure to file a return required under § 6034 (relating to returns by certain trust) or § 6043(b) (relating to terminations, etc., of exempt organizations):

Scenario

Daily Penalty

Maximum Penalty

Organization or trust (§ 6652(c)(2)(A))

$10

$5,000

Managers (§ 6652(c)(2)(B))

$10

$5,000

Split-Interest Trust (§ 6652(c)(2)(C)(ii))

$20

$10,500

Any trust with gross income exceeding $266,500 (§ 6652(c)(2)(C)(ii))

$105

$53,000


(3) for failure to file a disclosure required under § 6033(a)(2):

Scenario

Daily Penalty

Maximum Penalty

Tax-exempt entity (§ 6652(c)(3)(A))

$105

$53,000

Failure to comply with written demand (§ 6652(c)(3)(B)(ii))

$105

$10,500

.54 Other Assessable Penalties With Respect to the Preparation of Tax Returns for Other Persons. In the case of any failure relating to a return or claim for refund filed in 2019, the penalty amounts under § 6695 are:

Scenario

Per Return or Claim for Refund

Maximum Penalty

Failure to furnish copy to taxpayer (§ 6695(a))

$50

$26,500

Failure to sign return (§ 6695(b))

$50

$26,500

Failure to furnish identifying number (§ 6695(c))

$50

$26,500

Failure to retain copy or list (§ 6695(d))

$50

$26,500

Failure to file correct information returns (§ 6695(e))

$50 per return and item in return

$26,500

Negotiation of check (§ 6695(f))

$530 per check

No limit

Failure to be diligent in determining eligibility for head of household filing status, child tax credit, American opportunity tax credit, and earned income credit (§ 6695(g))

$530 per failure

No limit

.55 Failure to File Partnership Return. In the case of any return required to be filed in 2019, the dollar amount used to determine the amount of the penalty under § 6698(b)(1) is $205.

.56 Failure to File S Corporation Return. In the case of any return required to be filed in 2019, the dollar amount used to determine the amount of the penalty under § 6699(b)(1) is $205.

.57 Failure to File Correct Information Returns. In the case of any failure relating to a return required to be filed in 2019, the penalty amounts under § 6721 are:

(1) for persons with average annual gross receipts for the most recent three taxable years of more than $5,000,000, for failure to file correct information returns:

Scenario

Penalty Per Return

Calendar Year Maximum

General Rule (§ 6721(a)(1))

$270

$3,339,000

Corrected on or before 30 days after required filing date (§ 6721(b)(1))

$50

$556,500

Corrected after 30th day but on or before August 1 (§ 6721(b)(2))

$110

$1,669,500

(2) for persons with average annual gross receipts for the most recent three taxable years of $5,000,000 or less, for failure to file correct information returns:

Scenario

Penalty Per Return

Calendar Year Maximum

General Rule (§ 6721(d)(1)(A))

$270

$1,113,000

Corrected on or before 30 days after required filing date (§ 6721(d)(1)(B))

$50

$194,500

Corrected after 30th day but on or before August 1 (§ 6721(d)(1)(C))

$110

$556,500

(3) for failure to file correct information returns due to intentional disregard of the filing requirement (or the correct information reporting requirement):

Scenario

Penalty Per Return

Calendar Year Maximum

Return other than a return required to be filed under §§ 6045(a), §6041A(b), §6050H, §6050I, §6050J, §6050K, or §6050L (§ 6721(e)(2)(A))

Greater of (i) $550, or (ii) 10% of aggregate amount of items to be reported correctly

No limit

Return required to be filed under §§ 6045(a), §6050K, or §6050L (§ 6721(e)(2)(B))

Greater of (i) $550, or (ii) 5% of aggregate amount of items to be reported correctly

No limit

Return required to be filed under § 6050I(a)(§ 6721(e)(2)(C))

Greater of (i) $27,820, or (ii) amount of cash received up to $111,000

No limit

Return required to be filed under § 6050V (§ 6721(e)(2)(D))

Greater of (i) $550,or (ii) 10% of the value of the benefit of any contract with respect to which information is required to be included on the return

No limit

.58 Failure to Furnish Correct Payee Statements. In the case of any failure relating to a statement required to be furnished in 2019, the penalty amounts under § 6722 are:

(1) for persons with average annual gross receipts for the most recent three taxable years of more than $5,000,000, for failure to file correct information returns:

Scenario

Penalty Per Return

Calendar Year Maximum

General Rule (§ 6722(a)(1))

$270

$3,339,000

Corrected on or before 30 days after required filing date (§ 6722(b)(1))

$50

$556,500

Corrected after 30th day but on or before August 1 (§ 6722(b)(2))

$110

$1,669,500

(2) for persons with average annual gross receipts for the most recent 3 taxable years of $5,000,000 or less, for failure to file correct information returns:

Scenario

Penalty Per Return

Calendar Year Maximum

General Rule (§ 6722(d)(1)(A))

$270

$1,113,000

Corrected on or before 30 days after required filing date (§ 6722(d)(1)(B))

$50

$194,500

Corrected after 30th day but on or before August 1 (§ 6722(d)(1)(C))

$110

$556,500

(3) for failure to file correct payee statements due to intentional disregard of the requirement to furnish a payee statement (or the correct information reporting requirement):

Scenario

Penalty Per Return

Calendar Year Maximum

Statement other than a statement required under §§ 6045(b), 6041A(e) (in respect of a return required under § 6041A(b)), 6050H(d), 6050J(e), 6050K(b), or 6050L(c) ( 6722(e)(2)(A))

Greater of (i) $550, or (ii) 10% of aggregate amount of items required to be reported correctly

No limit

Payee statement required under §§ 6045(b), 6050K(b), or 6050L(c) ( 6722(e)(2)(B))

Greater of (i) $550, or (ii) 5% of aggregate amount of items required to be reported correctly

No limit

.59 Revocation or Denial of Passport in Case of Certain Tax Delinquencies. For calendar year 2019, the amount of a serious delinquent tax debt under § 7345 is $52,000.

.60 Attorney Fee Awards. For fees incurred in calendar year 2019, the attorney fee award limitation under § 7430(c)(1)(B)(iii) is $200 per hour.

.61 Periodic Payments Received Under Qualified Long-Term Care Insurance Contracts or Under Certain Life Insurance Contracts. For calendar year 2019, the stated dollar amount of the per diem limitation under § 7702B(d)(4), regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual, is $370.

.62 Qualified Small Employer Health Reimbursement Arrangement. For taxable years beginning in 2019, to qualify as a qualified small employer health reimbursement arrangement under § 9831(d), the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $5,150 ($10,450 for family coverage).

SECTION 4. EFFECTIVE DATE

.01 General Rule. Except as provided in section 4.02, this revenue procedure applies to taxable years beginning in 2019.

.02 Calendar Year Rule. This revenue procedure applies to transactions or events occurring in calendar year 2019 for purposes of sections 3.09 (rehabilitation expenditures treated as separate new building), 3.10 (low-income housing credit), 3.15 (transportation mainline pipeline construction industry optional expense substantiation rules for payments to employees under accountable plans), 3.21 (private activity bonds volume cap), 3.22 (loan limits on agricultural bonds), 3.23 (general arbitrage rebate rules), 3.24 (safe harbor rules for broker commissions on guaranteed investment contracts or investments purchased for a yield restricted defeasance escrow), 3.37 (expatriation to avoid taxes), 3.40 (debt instruments arising out of sales or exchanges), 3.41 (unified credit against estate tax), 3.42 (valuation of qualified real property in decedent's gross estate), 3.43 (annual exclusion for gifts), 3.44 (tax on arrow shafts), 3.45 (passenger air transportation excise tax), 3.48 (persons against whom a federal tax lien is not valid), 3.49 (property exempt from levy), 3.51 (interest on a certain portion of the estate tax payable in installments), 3.59 (revocation or denial of passport in case of certain tax delinquencies), 3.60 (attorney fee awards), and 3.61 (periodic payments received under qualified long-term care insurance contracts or under certain life insurance contracts).

SECTION 5. DRAFTING INFORMATION

The principal author of this revenue procedure is William Ruane of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Mr. Ruane at (202) 317-4718 (not a toll-free call).


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