Here's what you need to remember when filing your tax returns in 2020.
Just how eager you are to file your 2019 tax return, which the IRS begins accepting on Jan. 27 — depends on a lot of things.
Roughly 72% of the nearly 156 million tax returns filed through late December generated a tax refund, according to the latest IRS filing season statistics. Bed Bath & Beyond 20% coupon: What shoppers need to know about the discount The reality is that the standard deduction — which went up as part of Trump's tax reform that was enacted in December 2017 — is fairly tough to beat, and the odds have gone up that many tax filers simply will take the standard deduction.
There is also an additional standard deduction for taxpayers who were born before Jan. 2, 1955 — or age 65 and older — or blind. One major challenge: If you itemize, you now can only deduct up to $10,000 for state and local real estate taxes, personal property taxes and income taxes. But taxpayers aren't in the clear, as much legal haggling has surrounded such efforts. The IRS put a stop to one workaround, which was attempted in New York and elsewhere, that would have reclassified tax payments as charitable contributions since charitable donations remain fully tax deductible.
The $10,000 limit applies to both married and single homeowners. So there is a"marriage penalty" because typically a limit would be twice as high for a married couple, Sammartino said. Moving expense deductions: Gone in 2018 and 2019. But there remains an exception for active-duty military for a move relating to military orders to a permanent location. In that case, the military can deduct moving expenses, such as travel and lodging, transportation of belongings and shipping cars and pets.
Got a job in the gig economy? The IRS kicked off a new Gig Economy Tax Center at www.irs.gov to offer tips and resources on questions relating to filing requirements, deductible business expenses and special rules for reporting vacation home rentals. As a result, taxpayers who qualified for those breaks in 2018 may now want to consider whether they want to amend their returns, according to Susan Allen, senior manager for tax practice and ethics for the American Institute of Certified Public Accountants. But you'd have to analyze whether the cost of amending that return exceeds how much money you'd save.
And income limits will apply for the resurrected deduction. You could deduct up to $4,000 in qualified expenses if your modified adjusted gross income is up to $65,000, or up to $130,000 if you’re married and filing a joint return. Medical expenses. For some families with big medical bills, here's a tax break that you don't want to ignore. Qualified medical and dental expenses will remain deductible on 2018 through 2020 tax returns. But, remember, you must pay attention to the threshold for taking such a deduction. You can deduct unreimbursed medical expenses to the extent that they exceed 7.5% of adjusted gross income.
“This is a way for the IRS to get rid of the deduction so that they’re always collecting a tax on alimony,” says Christina Taylor, head of operations at Credit Karma Tax. “This is going to have a bigger impact on a person paying alimony.”
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