SELECTED IMPORTANT 2020 TAX ITEMS:
• Casualty Loss: Effective beginning in 2018, this deduction has been eliminated, with the exception of casualty losses suffered in a federal disaster area. A taxpayer who suffers a personal casualty loss from a disaster declared by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act will still be able to claim a personal casualty loss as an itemized deduction, subject to the $100-per-casualty and 10%-of-Adjusted Gross Income limitations.
• Qualified Business Income Deduction: This provision, also known as Section 199A, allows a deduction of up to 20% of qualified business income for owners of some businesses during the year 2020. Limits apply based on income and type of business. The K-1’s from S Corporations and Partnerships will possibly be much more detailed due to allocations of business income in some cases.
• Business Interest Expense Deduction: In general, for businesses with $26 million or less in average annual gross receipts, business interest expense is limited to business interest income plus up to 50% of the business’s adjusted taxable income for the 2020 tax year.
• Employee Retention Credit: The Employee Retention Credit is a fully refundable tax credit for employers equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that Eligible Employers pay their employees. Visit https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-how-toclaim-the-employee-retention-credit-faqs for more information.
• Like-Kind Exchanges: Like-kind exchange treatment applies only to certain exchanges of real property for the 2020 tax year.
• Meals: Taxpayers can continue to deduct 50% of the cost of meals if the taxpayer or an employee of the taxpayer is present and the food or beverages are not considered as lavish or extravagant. If food is provided during or at an entertainment activity, the food and beverages must be stated separately from the cost of the entertainment.
• Entertainment: Deductions for expenses related to entertainment activities are not deductible for the 2020 tax year.
• Medical Expense Deduction: In 2020, your out-of-pocket medical expenses will need to exceed 7.5% of your AGI before any of those expenses can become eligible for itemized deductions.
• Home Mortgage Interest: You may only be able to deduct interest on acquisition indebtedness, which is your mortgage used to buy, build or improve your home up to $750,000 ($375,000 for married taxpayers filing separately).
• Taxes: If you itemize your deductions in 2020, you may be allowed a deduction for general sales tax, property taxes, and State income tax with an overall limit of $10,000 ($5,000 for married taxpayers filing separately).
• Charitable Donations: For 2020 only, taxpayers who itemize deductions on their tax returns can make a donation to a qualifying charity and deduct up to 100% of their adjusted gross income. Taxpayers who do not itemize deductions may take an above-the-line charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations.
• Job Expenses and Miscellaneous Deductions subject to 2% floor: For the 2020 tax year, Miscellaneous deductions which exceed 2% of your Adjusted Gross Income are not deductible. This includes deductions for unreimbursed employee expenses, tax preparation expenses, investment fees, and home office.
• Premium Tax Credit for Individuals: You may be eligible if you meet all of the following: Buy health care through the marketplace, are ineligible for coverage through an employer or government plan, are within certain income limits, do not file married filing separate returns (unless domestic abuse victims), and cannot be claimed as a dependent by another person. Learn more at https://www.irs.gov/affordable-care-act/individuals-andfamilies/the-premium-tax-credit-the-basics
• Depreciation: 100% Depreciation expensing for certain business property acquired and placed in service after September 27, 2017 and before January 1, 2023 is available. The special 100% first-year bonus depreciation for certain new or used qualified property is available.
• Section 179 Deduction Limit: The small business expensing limitation and phase-out amounts from prior year have been extended for 2020. Businesses can expense up to $1,040,000 in 2020. The phase-out is $2,590,000.
• A 0.9% Medicare surtax on earned income for higher-incomers: This applies to wages as well as to selfemployment income. Singles and heads of household will owe it once total earnings exceed $200,000; married filing jointly – over $250,000; married filing separately – over $125,000. It applies only to the employee’s share of Medicare tax.
• The 3.8% Medicare surtax on net investment income: This applies to unearned income of single filers and heads of household who have modified adjusted gross incomes above $200,000, couples with modified AGIs over $250,000 and $125,000 for separate filers.
• Capital gains and dividends have a top rate of 20% for high income taxpayers – singles over $441,450 and married couples over $496,600. For others, it may be 15% in some cases. (Also see 3.8% Medicare tax.)
• The estate and gift tax exemption for 2020 increases to $11,580,000: The tax rate remains at 40%. The annual gift, exempt from filing requirements, remains at $15,000 per donee. Gift tax returns are due by 4/15/21 if gifting over $15,000 per person.
• Personal tax rate: This is reduced to 37%. for the 2020 taxable income over $518,400 for singles; $518,400 for head of household; $622,050 for married couples filing jointly.
• The 2020 standard deduction rises in to $24,800 for married. If one spouse is 65 or older -- $26,100; if both, then $27,400. Singles -- $12,400; $14,050 if they are 65. Heads of household -- $18,650; $20,300 if they are 65. Blind people receive $1,300 more ($1,650 if unmarried and not a surviving spouse).
• Personal exemptions are removed for filers and their dependents.