![]() The American Opportunity Tax Credit remains unchanged for 2020. However, you are limit to only credit per tax return. The Lifetime Learning Credit allows taxpayers to claim a tax credit worth 20% of up to $10,000 in college tuition and fees. Changes to educational tax breaksįamilies paying for college have several options for claiming higher education expenses on their 2020 tax returns. You must itemize your deductions to claim this deduction. The deduction may be limited or phased out entirely if your AGI is more than $100,000 ($50,000 if married filing separately). It was extended again – through 2021 – under the second stimulus package signed at the end of December 2020. The ability to deduct mortgage insurance premiums originally expired in 2017, but Congress revived it with the Further Consolidated Appropriations Act of 2020, making it available for 2018 through 2020. Mortgage insurance premiums are still deductible You typically have until the tax filing deadline to make IRA contributions for 2020. The deduction phases out for single filers with AGIs between $65,000 and $75,000 ($104,000 to $124,000 for married couples filing jointly) if covered by a workplace retirement plan. The deduction phaseouts for contributions to traditional IRAs are a little more generous in 2020. For 2020, contributions phase out at an adjusted gross income (AGI) of $124,000 to $139,000 for single filers and $196,000 to $206,000 for couples. ![]() However, the income limit to contribute to a Roth IRA increased. The contribution limit for traditional and Roth IRAs remained at $6,000 (plus an additional $1,000 for taxpayers age 50 and up). People age 50 or older can make an additional "catch-up" contribution up to $6,500. The maximum 401k contribution for 2020 is $19,500. Some retirement account contribution limits increased for 2020 as well. You have up to three years to put the money back in your retirement account and undo the distribution's tax consequences. The 10% early withdrawal penalty is waived for up to $100,000 of COVID-19-related payouts.In a normal tax year, RMDs are required to be made and typically increase taxable income. Seniors may skip their required minimum distributions (RMDs) in 2020 without penalty.Here are the most significant retirement plan provisions that may affect your 2020 tax return: The Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted in March of 2020. ![]() ![]() The withdrawn amount may still be taxable income. Taxpayers who have a baby or adopt a child can withdraw up to $5,000 from an IRA or 401(k) without having to pay the 10% penalty for early withdrawals.Owners of traditional IRAs can now make contributions past the age of 70½.This change only applies to account owners who turn 70½ in 2020 or later. The beginning age for taking required minimum distributions (RMDs) rose from 70½ to 72.The Setting Every Community Up for Retirement Enhancement (SECURE) Act went into effect on January 1, 2020. Two recent pieces of legislation made changes to the tax rules for retirement savings. Changes to retirement savings rules and limits For single filers and heads of household, the additional standard deduction is $1,650. Married taxpayers age 65 or older get an additional $1,300 per person for each spouse age 65 or older. Married couples filing jointly: $24,800.Single and married filing separately filers: $12,400. ![]() The standard deductions were increased for inflation in 2020: Taxpayers who don't itemize deductions can claim the standard deduction, an amount predetermined by the IRS that reduces taxable income. The standard deduction increased for inflation To help you out, we put together a list of the most important updates for filing your 2020 tax return. Part of that preparation includes understanding what's changed from last year - and there are plenty of updates and changes taking effect. Whether you file your tax return as soon possible, skate in just before the April 15, 2024 deadline, or request an extension, it's never too early to start preparing for filing your 2020 taxes in 2021. For information on the third coronavirus relief package, please visit our “ American Rescue Plan: What Does it Mean for You and a Third Stimulus Check” blog post. ![]()
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