COVID-19 uncertainty abounds. By monitoring tax changes on your behalf, we can work together to navigate the right path for you and your family. Here is a round-up of some of the new personal tax-related laws.
Standard deductions for the 2020 tax year are $12,400 for individuals and $24,800 for married joint filers. That means many taxpayers will choose not to itemize. But the CARES Act comes with a surprise. Even if you use the standard deduction, you can take a $300 above-the-line deduction for cash contributions to charity.
Many individuals are receiving stimulus payments of $1,200 while couples are getting $2,400. These government payments are free from taxes. So no matter how much you owe or don’t owe for 2020, you get to keep all of the stimulus money.
The CARES Act waives all required minimum distributions (RMDs) from IRAs and defined contribution plans such as profit sharing and 401(k) plans for 2020. This includes your first RMD if you reached age 70 ½ during 2019. If you already took your 2020 RMD, you may roll the amount back into the plan if you do so by August 31, 2020.
In 2020, you can take a distribution from your retirement account for coronavirus-related reasons and not pay the 10% early distribution penalty. You will still have to pay taxes, but this can be done over three years. You can also pay the distribution back within three years regardless of the annual caps on retirement plan contributions. Another option is to take a loan from your retirement plan of up to $100,000 between now and September 22, 2020 and defer loan payments for up to one year.
Contact an Alloy Silverstein CPA for guidance to your specific situation.
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