2020 has been a one-of-a-kind year. Everyone has been affected in some way or another. No matter how this year ends, or if he just morphs into next year, there are only two things in life you can count on…death and taxes. So as “generous” as the government has been (or hasn’t been) this past year, their “payday” is right around the corner. It’s not all bad, though; most of the tax law changes are still aimed at easing the economic impact of the pandemic as well as expanding opportunities for increasing retirement savings. 

Below are the most prominent to date. Check back with us at Lewis Financial Tax Service, LLC for other changes specific to you and any additions that will undoubtedly come with a new President.

(Disclaimer: The following is a list of items that have changed the tax law due to the passing of the SECURE Act, CARES Act, and others. Once the Presidency changes hands in January, there will likely be other tax law updates.)

2020 Recovery Rebates
Also known as the “stimulus checks”, it was more specifically a rebate for 2020 that was paid early. Receiving any amount of payment will not reduce your refund for the 2020 tax year. However, if you didn’t qualify for the rebate, or only received a partial “phase out” amount, that amount could be increased if your income was different in 2020 as opposed to 2019 OR there was an added dependent.

Charitable contributions
Nonitemizers can claim up to $300 in charitable cash donations. For itemizers, the limitation of 60% of your modified income has been pushed to 100% for cash contributions. It remains at 50% for non-cash items

Educators
Teachers who don’t itemize, can claim $250 in educator expenses this year. If two educators are married and filing jointly, that number is $500. (These expenses must be unreimbursed.)

Self-Employed Family and Medical Leave
Self-employed individuals can receive a credit against the Self Employment Tax. This applies if you were forced to quarantine based on federal, state, or local order, or medical advice; or if you were caring for someone who met those conditions; or caring for a son or daughter whose daycare had been closed due to Covid-19 precautions. The amount varies so much that it would be best to just contact us so we could discuss it. 

Employers Paid Family and Medical Leave
This is too in-depth to begin to discuss here. However, we are up to speed with every aspect of the Families First Coronavirus Response Act, so please contact Ryan for a FREE consultation.

Required Minimum Distributions (RMDs)
The RMD rules have been waived for certain plans and IRAs for 2020. The required beginning date for RMDs has changed from 70 ½ to 72 for individuals turning 70 ½ after 2019.

Retirement Early Distributions
The 10% early withdrawal penalty has been waived for distributions up to $100,000 from IRAs and 401(k) plans. These distributions must be made between January 1, 2020 and December 31, 2020.You can elect to have the income from these distributions taxed over a three-year period, and you may also elect to recontribute the funds to an eligible plan within three years without regard for that year’s cap on contributions. Please note: the CARES Act provision must be included in your plan.

Traditional IRA Contributions
The maximum age limit of 70 ½ has been repealed.

New Standard Deduction (Update for inflation)
While only 13.7% of Americans now itemize following the JCJA in 2018, the IRS continues to increase the Standard Deduction each year for inflation. (Reminder: You don’t have to itemize to claim the $300 charitable contribution discussed above) Tax Year 2020 table:

Single: $12,400 (+$200); $14,050 if over age 65

Married Filing Joint: $24,800 (+$400); additional $1,300 each individual over age 65

Head-of-Household: $18,650 (+$300); additional $1,650 each individual over age 65

Standards Mileage Rates
Business: $0.575 per mile

Medical & Military Relocation: $0.17 per mile

Charitable: $0.14

Others
There are many more tax tables that have changed that are more specific to certain clients and would be too in-depth for the purpose of this entry. Please reach out to us regarding any other tax tables that may apply to you. Contact US.