Now that we have entered the 2020 tax season, we have listed some vital information below that could help make tax season easy for you.
Hopefully, by this time, you have already secured your W-2s and other forms you will need for filing your taxes. If not, don’t wait any longer and get those forms.
If your situation is more complex and complicated than most folks, reach out to a tax professional to help you straighten things out. These tax professionals, like the good folks of Tri-Merit.com, has the technical expertise to deal with some of the most complex situations.
2020 Tax Season Changes Affecting Your Taxes for 2019
Income Tax Brackets and Rates
To account for inflation, income tax brackets have been increased in 2019. What this means is that tax rates for the year 2019 will remain the same but the income tax bracket has been slightly adjusted by a few hundred dollars to accommodate inflation from 2018.
Increase in Standard Deductions
In 2018, tax filers rejoiced when the standard deductions were almost doubled. For this year, further adjustments have been made with a slight increase in deductions. This is, again, brought about by inflation.
No more No Health Insurance Penalties
A couple of years ago, not having health insurance can be costly. The penalty for having no insurance was $695 in 2018. However, one of the new changes that will be implemented this year is getting rid of those penalties. So, if you have no health insurance, you no longer have to worry about penalties and fines. Of course, this is no excuse to not get health insurance.
Medical Expenses Deductions
Since we’re on the topic of health care, there has also been a slight change with the threshold for medical expenses deductions. From a 7.5% threshold from one’s AGI (adjusted gross income), it has now been brought up to 10% of unreimbursed medical expenses.
Estate Tax Exemption Changes
The taxes you have to pay for inherited property and money have also changed. Up to 40% tax can be placed on an inheritance of $11.4 million and above. The previous year’s limit was $11.2 million.
What Stayed the Same
The Child Tax Credit
From 2018’s tax reform law, there was an increase of $2,000 for each qualified child and a limit of $400,000 for joint filers and $200,000 for single filers.
If you have 529 college savings plans for your children, you may still use them sans tax on other educational avenues such as private schooling and home tutoring,
Homeowner Mortgage Deductions
The tax reform law of 2018 lowered the maximum mortgage principal to $750,000. No changes have been made in this area. If you had an existing mortgage of $750,000 to $1 million before the implementation of the tax reform, it can be exempted based on the old deduction.
You may still itemize your deductions for state and local taxes (income, property, and sales) for up to $10,000.
Donations made to charity can be deducted by up to 60%.
Dates to Take Note of for 2020 Tax Season
Late January 2020
The official start of tax season in the United States
January 31, 2020
By this time, you should have already secured the necessary forms for filing. If you still haven’t received any forms on this date, reach out to your company’s HR to help you sort things out.
April 15, 2020
Tax Day, the day your 2019 income tax return is due. This is also the last day for requesting a six-month extension if you need more time to file your taxes. However, an extension of filing does not mean an extension of payment. If you don’t like penalties and interests, pay on time.
June 15, 2020
For those living outside the U.S. or are deployed servicemen, this is the last day of your automatic two-month filing extension (on top of a request for one). Simply make sure you start filing before April 15 to avoid being charged interests on your taxes.
October 15, 2020
For those who were granted a six-month filing extension, this is the last day for filing your taxes.
Tax season can be stressful but if you prepare and plan accordingly, you will minimize the headaches compared to coming into the season unprepared.