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News for 2020
The CARES Act allows you to deduct up to 100% of your adjusted gross income (AGI), which is your total income minus other deductions you have already taken, in qualified charitable donations if you plan to itemize their deductions. There is also a new “above-the-line” deduction that will help you write off up to $300 of charitable contributions you made in cash, even if you are claiming the standard deduction.
You can deduct medical expenses in excess of 7.5% of your adjusted gross income (AGI). This is a decrease from the 10% level that was previously scheduled to take affect in 2020.
Your stimulus check was an advance payment of a special 2020 tax credit known as the recovery rebate credit. When you file your 2020 return, you'll have to reconcile the stimulus check you received with the recovery rebate credit you're entitled to claim. For most people, the stimulus check payment will equal the tax credit allowed. In that case, your credit will be reduced to zero. However, if your stimulus check was less than your credit amount, the tax you owe will be reduced by the difference and any remaining amount refunded to you. If your stimulus check was more than your credit amount, you generally won't have to repay the difference to the IRS. The stimulus payments are not considered taxable income. You should have received notice 1444 showing the amount you received; I will need this notice to do the necessary computations.
The CARES act suspended RMD's for 2020.
The CARES Act also includes other key retirement-related tax breaks for 2020. First, it waives the 10% penalty on pre-age-59½ payouts from retirement accounts for up to $100,000 of coronavirus-related payouts. A coronavirus-related distribution can also be included in income in equal installments over a three-year period, and you have three years to put the money back into your retirement account and undo the tax consequences of the distribution. Form 8915-E must be attached to your return to spread out the tax on the distributions. Second, the CARES Act allowed eligible individuals to borrow more from workplace plans such as 401(k)s—up to the lesser of $100,000 or 100% of the account balance—until September 23, 2020. Repayments on retirement plan loans due in 2020 are also delayed for one year.
The standard deduction amounts were increased for 2020. Married couples get $24,800, plus $1,300 for each spouse age 65 or older. Singles can claim a $12,400 standard deduction and $14,050 if they're at least 65. Head-of-household filers get $18,650 for their standard deduction, plus an additional $1,650 once they reach age 65. Blind people can tack on an extra $1,300 to their standard deduction ($1,650 if they're unmarried and not a surviving spouse).
The Families First Coronavirus Response Act includes tax relief for self-employed people who can't work because of the coronavirus. The law forces many employers to provide paid sick and family leave for workers affected by the virus. However, tax credits against the self-employment tax are also allowed for self-employed people who can't work for a reason that would entitle them to coronavirus-related sick or family leave if he or she were an employee. (Employers also get tax credits to help them pay for the paid leave they are required to give their employees.) Disclaimer: Although every effort has been made to insure the accuracy of the information on this page, it is not intended as and does not constitute tax advice from me. Individuals seeking tax advice should contact me to arrange a consultation. |
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