Tax season is right around the corner and there have been a few changes to the tax laws for 2020 that you should be aware of when preparing your taxes. Below are a few of the changes:
- The CARES act allows for you to claim more for charitable donations. Even if you take the standard deduction, you can claim up to $300 for cash charitable donations (it does not apply for any other items such as: clothing, food, furniture, etc.). Additionally, if you itemize your deductions, you can deduct more than in previous years.
- The stimulus payments were an advance refundable credit and are not taxable.
- There have been adjustments for inflation. For example, the standard deduction for heads of households is $18,650 (up $300), for married filing jointly it is $24,800 (up $400), for single and married filing separately it is $12,400 (up $200). Marginal tax rates, Earned Income Credit, limitation for transportation fringe benefit and parking, and other credits and deductions have also been adjusted. For a complete list of these adjustments you can go to the IRS website.
- The SECURE act retroactively reversed the kiddie tax rate for a child’s unearned income to reverse the negative impact that the Tax Cuts and Jobs Act created for many families. The IRS has a topic page with more information.
- More of the tax changes can be found at Investopedia.com.
It is always important to plan ahead and get started on your taxes early to avoid late penalties. This year, however, it is especially important to give yourself more time with all the tax changes and challenges created by the COVID-19 pandemic. The IRS has a special webpage with some helpful tips to prepare for tax season.