The year 2020 has been challenging. With unemployment at an all-time high and many businesses struggling to survive, the last thing we need to worry about is changing tax laws. While it’s certainly true that most changes in tax laws don’t typically benefit taxpayers, there are some changes that you could find beneficial this tax season. The experts at Mark Dicus & Company have provided the following information regarding these changes and how they can help you.
New Tax Laws for 2020 Filing Season
Charitable Donations Tax Deduction Limit 2020: if you made cash donations in2020 to a 501(c)3 organization, changes in the CARES Act allow a deduction for contributions of $300 or less when you file your 2020 tax return.
Economic Impact Payment Credit on 2020 Tax Return: Most families received a stimulus check through the CARES Act, which incidentally is not included in your gross income. The good news is that it will neither reduce the amount of your refund nor increase the amount you owe in taxes to the government.
401K, Simple & Other Contribution Limits: There have been some significant changes made regarding retirement plans that you could benefit from this year. For example, maximum contributions for your 401(k), 403(b), 457, and simple IRAs increased by $500, and the income cap in Roth IRA contributions also increased based on your adjusted gross income.
Cares Act; Do Seniors Get a Tax Break in 2020?: One of the most significant tax changes involves RMDs (required minimum distributions. Seniors are required to take out a certain amount of money from their retirement accounts annually. The Secure Act raised the minimum age from 70 ½ to 72 for any senior who turns 70 ½ after 2019. The Cares Act allows seniors to avoid these distributions in 2020 due to the pandemic without penalties of any kind.
Changes Affecting New Parents: If you are expecting a baby or considering adopting, you can now withdraw payments up to $5000 per spouse without paying the typically 10% fine.
Changes Affecting Payouts and Loans: Taxpayers aged 59½ years and younger can withdraw payments from their IRAs or 401(k)s for COVID expenses without paying the typical early withdrawal penalty of 10%, providing the withdrawals are under $100,000. These loans can be repaid within three years of the initial transaction to enable you to treat the transaction as a direct rollover.
2020 Standard Deduction: Recent tax law changes initiated a few years ago increased the standard deduction that you can receive on your taxes by almost double. You can expect to see a slight increase this year. Your Mark Dicus Company LLC tax professional can advise you on these changes to ensure that you are making the most of your standard deductions.