Please contact me to review your concerns about the 2020 Tax Law changes
Spousal rollover trap This could occur if the Spousal beneficiary for a new IRA account does a rollover before age 59 ½, causing the distribution to be subject to the 10% early distribution penalty. RMD’s related to Spousal Rollovers after age 59 ½ can be made penalty free over the Spouse’s life using their Uniform Lifetime Tables.
Qualified Charitable Distributions (QCDs) from IRA accounts can count as part of your required minimum distribution up to $100,000 but are not taxable income to you. You can still make QCDs even though the required minimum IRA distributions have been suspended for 2020.
Schedule A Changes The Medical expense floor was reduced from 10% to 7.5%; Non-Business Energy Credit and. The Tuition Expense deduction have been extended through 2020; The Mortgage insurance deduction expires in 2021.
Temporary waiver of RMDs Required Minimum Distribution is generally not required in 2020. This would include those who must make their first RMD as well as inherited IRA accounts. Also, the required age to begin making your RMD distributions was raised to age 72 for those individuals who have not reached age 70 I/2 by 12-31-2019.
The Estate Tax Exemption is increased to 10 million and will expire in 2025.
2020 Stimulus payments are not taxable because it is treated as an advance payment as a 2020 tax credit. However, you are required to reconcile this credit on your 2020 tax return; There is no provision in the law requiring you to return the payment you received if it exceeds the credit you are allowed on your tax return.
Economic Impact payments received in 2020 were based on income levels reported on the last tax return that you filed. Consequently, the credit you received may be different based on your 2020 income level. The IRS will allow additional credit on the 2020 tax return to compensate you for the payment that you were entitled to receive.
IRA Distributions Rule Changes Non-spouse beneficiaries may make distributions over 10 years. They will pay ordinary income tax if the funds are not held for more than 5 years. However, Spouse beneficiaries are not required to take RMD distributions. Also, Spousal Roth rollover distributions can be made without penalty even if the spouse is under ag 59 ½.
Deferral of Employer Social Security Tax Payments for the 6.2% share of employees’ social security tax payments incurred in 2020. The employer can defer these payments for 2 years. So, one half is required to be paid by 12/31/21 and the other half by 12/31/22. The Social Security Trust fund would be held harmless under this provision.Changes in the Contribution Deduction Individuals who do not itemize deductions may deduct up to $300 to charities. Consequently, this extra deduction will reduce income $ for $ and would be an addition to your standard deduction. Also, the AGI limitation for cash contributions is increased to 100% for taxpayers who itemize their deductions