SECURITY REMINDERS FOR TAXPAYERS
Again, we are warning taxpayers to learn to recognize and avoid phishing emails, threatening phone calls and texts from thieves posing as legitimate organizations such as your bank, credit card company and government organizations, including the IRS. Do not click on links or download attachments from unknown or suspicious emails. Also, hang up the phone if someone is claiming to be the IRS. The IRS does not call taxpayers.
REMINDER - Some refunds will be held until Mid - February
Taxpayers who claim the Earned Income Tax Credit or the Additional Child Tax Credit may experience a refund hold. According to the Protecting Americans from Tax Hikes (Path) Act, the IRS cannot issue these refunds before mid-February.
EDUCATIONAL TAX CREDITS
Many clients depend on federal tax breaks to help offset the cost of higher education for themselves and dependents. A provision in trade legislation enacted in 2015 requires taxpayers to have in hand the 1098-T to claim any education tax benefits. This statement, which for several years has been sent by schools to students with copies to the IRS, verifies that you paid what the IRS calls “qualified educational expenses” in the preceding tax year. Please remember to bring your 1098-T statement with you along with any receipts for books, course materials and required equipment for this year’s tax filing, it will save you time and money. The 1098-T can also be found online in your student’s college account.
2020 TAX BRACKETS
- 10% for incomes of $9,875 or less (less than $19,750 for joint filers)
- 12% for incomes over $9,875 ($19,750 for joint filers)
- 22% for incomes over $40,125 ($80,250 for joint filers)
- 24% for incomes over $85,525 ($171,050 for joint filers)
- 32% for incomes over $163,300 ($326,600 for joint filers)
- 35% for incomes over $207,350 ($414,700 for joint filers)
- 37% for incomes over $518,400 for single filers ($622,050 for married couples filing jointly)
CAPITAL GAINS RATES
0% for incomes up to $40,000 ($80,000 for joint filers)
15% for incomes over $40,000 ($80,000 for joint filers)
20% for incomes over $441,451 ($496,601 for joint filers)
REQUIRED MINIMUM DISTRIBUTIONS
RMD’s do not need taken until age 72 per the 2019 SECURE Act
401k - $19,500 (Extra $6,500 age 50+)
IRA - $6,000 (Extra $1,000 age 50+)
HSA - $3,550 single, $7,100 family
TAXPAYERS ARE NO LONGER SUBJECT TO THE HEALTHCARE PENALTY
For the tax year 2020, if you don’t have minimum essential health care coverage, you don’t have to pay the shared responsibility penalty.
STANDARD DEDUCTION INCREASES
For 2020, the standard deduction increases to the following:
- Single – $12,400
- Married filing jointly or Qualifying widow(er) – $24,800
- Head of household – $18,650
Remember, for taxpayers over 65, they receive an additional $1,300 for their standard deduction.
MEDICAL EXPENSE THRESHOLD
For the 2020 tax year, the medical expense threshold will be 7.5% of AGI.
Here’s an example. Allie’s adjusted gross income is $100,000, she needs to be able to deduct more than $7,500 in medical expenses in order to be eligible for the deduction. Only expenses greater than $7,500 will count toward the deduction.
- 57.5 cents per mile for business miles
- 17 cents per mile for medical miles
- 14 cents per mile for charitable miles