Due to the sweeping impacts of the COVID-19 pandemic, 2020 was an extremely active year when it comes to tax changes. Some changes only apply to 2020, but many more will have lasting impact. Here we discuss, not every change, but common items you should evaluate while filling out 2020 tax forms.
The widely publicized “stimulus” (IRS calls them Economic Impact Payments) checks were an advance of this 2020 credit. If you receive the correct amount for each payment this credit won’t impact your return. However, for those who didn’t receive the correct allocation this credit will make it right. More Info
The CARES Act passed by Congress in March required employers to provide paid sick leave for employees who were unable to work (or telework) due to COVID-19 related events. To help financially implement the policy employers were given a payroll tax credit.
Now, affected self-employed individuals may claim a similar credit on their 2020 income tax return. If you were self-employed and unable to work due to COVID-19 related events, you may be eligible for up to $5,110 from this credit. More Info
For 2020 & 2021 only charitable donations of up to $300 (per tax return) may be deducted in addition to the standard deduction. To apply to this special deduction, donations must be gifts of money. Non-monetary gifts (clothing, cars, etc.) will continue to apply only for those electing to itemize. NOTE: For 2021 only, joint files may deduct up to $600. More Info
Deductible charitable contributions are normally limited to 60% of adjusted gross income (AGI). For 2020 only, that limit has been raised to 100%. More Info
For a brief period (2018 & 2019) children’s dividends and interest (unearned income) was taxed at the highest rates using the tax brackets for estates and trusts. This caused kids with just $15,000 in income to be taxed at the top rate of 37%. Fortunately, these rules have been completely repealed. Amended returns for anyone affected may be filed to get a refund.
Teachers are used to deducting up to $250 worth of money spent on classroom supplies. For 2020, supplies may include COVID prevention items such as face masks, cleaning & sanitizing materials, and social distancing items. More Info
Several key tax deductions must be renewed every year. In 2020 several changes were made to the list. You’re probably most excited to know your racehorse will continue to be three-year property. If not, the most popular items are:
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