Congress continues to tinker with the tax code
"To provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018." This is the official name of the new tax bill signed into law by President Trump on Dec 22, 2017.
The new tax bill introduces extraordinary complexity into a tax landscape that politicians promised to "reform" and simplify. They even touted a tax return on a postcard that anyone could fill out.
Fewer taxpayers will itemize their deductions on their 1040. For most taxpayers, it is no longer necessary to track out of pocket medical expenses or work related expenses. Most taxpayers will no longer itemize mortgage interest, real estate taxes, charitable deductions (for federal purposes) etc.
Items that will still need to be tracked include student loan interest, HSA contributions and distributions, educator expenses for the classroom, charitable contributions (over $500 only for MN),
post-secondary (college) tuition and fees and books, child care, long term care premiums, health insurance premiums for self-employed taxpayers, etc.
For 2020, cash charitable contributions up to $300 may be deducted from your federal adjusted gross income. (For 2021 - up to $300 for a single taxpayer, $600 for a married couple).
Todd's Tax Service LLC
Highlights of what you should consider for for 2020 and going forward...
Accelerate payments on mortgages and other debt. (Many individuals will no longer receive ANY tax benefit at all from the mortgage interest deduction.) Paying down debt reduces your risk level in the future in the case of a downturn in the economy.
Stop keeping track of your work expenses. Remarkably, Congress voted to take away ALL deductions from working Americans. You can no longer deduct union dues, mileage to temporary job sites, uniforms, meals if you are an over the road trucker etc. When possible, have these items paid with pre-tax $ via payroll deduction.*
Contribute to a 529 Plan for your children, grandchildren, nieces, nephews, etc.
Add the Roth 401K (or contribute to an individual ROTH) to your retirement plan mix.
(Modestly lower tax rates reduce the benefit of regular 401K contributions.) If tax rates rise in the future, ROTH distributions will look better since they are tax free after age 59 1/2.
If you are 70 1/2+ and make charitable contributions, make them directly from your
The tax cuts will reduce federal revenues and jeopardize the federal government's ability to meet it's future obligations. Get your house in order as future programs are likely to be cut or reduced. This is not a "feel good" tax cut since the federal government operates with huge deficits and is running up a huge debt.
*In limited situations, employee work expenses may be deductible on some state returns.
Todd's Tax Service LLC
Recent tax legislation tinkers around the edges with our tax framework. We will share personalized advice and information to keep you informed and positioned for the best tax and financial outcome.
The CARES act has numerous changes including special provisions for retirement plan distributions and calculating the earned income credit on 2020 tax returns.