The 2021 tax filling season started February 12th and Tax Day is Thursday, April 15th. You should be preparing to file your 2020 tax return and be familiar with the new tax laws. Below I’ll review some of the notable items.
The SECURE Act changed the beginning age for taking RMDs from 70 ½ to 72. The CARES Act allowed seniors to skip RMDs in 2020 without a penalty. For more information on RMDs check here.
To encourage more charitable giving, the CARES Act allows you to deduct up to 100% of your adjusted gross income (AGI). If you are taking the standard deduction, the CARES Act added a new “above-the-line” deduction that will allow you to write off up to $300 of donations you made in cash. Read more here.
Tax Brackets / Standard Deduction
The IRS made minor inflation adjustments to the 2020 tax brackets. The standard deduction is $12,400 for singles, up from $12,200 last year, and $24,800 for married joint fillers, up from $24,400 last year.
Two rounds of stimulus checks were sent out by the IRS. The stimulus checks are not considered taxable income. Not every person who was eligible received their stimulus. To ensure you received the money you were entitled to, make sure to file a 2020 tax return.
If your parents claimed you as a dependent for 2019, you may still be eligible for the stimulus checks. For 2020, if your parents do not claim you as a dependent and you file as an independent you may get a $1,800 tax credit.
During quarantine, more people started selling stuff online – technology, furniture, clothing, collectibles and more. Some did because they needed the cash and others just out of boredom. If you use a merchant like PayPal, Cash App, or others, they may issue you a 1099-K. In some states, such as Illinois, the reporting threshold for 1099-K is lower than the federal threshold. In Illinois, $1,000 in gross payment volume from sales of good or services is required to be reported on your tax return.
If you have not received your tax forms in the mail yet, log in to your Account View and click on the documents tab to download them. If you would like to make a 2020 contribution to your IRA, please call us before the April 15th deadline and we can get that taken care of for you. This blog post just scratches the surface on new changes for 2020, and I would be happy to help you navigate through all of your options.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial does not provide research on individual equities. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy ensures success or protects against loss. This information is not intended to be a substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax advisor.