- For taxpayers who take the standard deduction, you now can take a charitable deduction of up to $300 for the tax year 2020. For the tax year 2021, married couples filing jointly can deduct up to $600. There is an increased penalty for overstating this deduction. In order to get this deduction, all cash contributions you have made throughout the year must have supporting documentation.
EDUCATOR EXPENSE TAX DEDUCTION
- The cost of personal protective equipment and other supplies used for the prevention of the spread of COVID-19 can now be included as eligible expenses. Webcams and headsets are also includable as qualifying educator expenses. The educator expense deduction is currently $250. You cannot deduct classroom expenses if you have been reimbursed for them. You must have receipts to support all deductions. The PPE change applies retroactively to March 12, 2020.
- The deduction for qualified tuition and related expenses has been repealed. However, the phaseout limits on the lifetime learning credit will be increased for tax years beginning after December 31, 2020.
- Business Owners and Self-Employed Individuals can temporarily take a 100% business expense deduction for meals provided by a restaurant. This is effective for expenses incurred after December 31, 2020 (but will expire at the end of 2022).
EMERGENCY WITHDRAWS FROM TAX DEFERRED RETIREMENT ACCOUNTS
- Penalty-free withdrawals from select retirement plans can be made for coronavirus-related expenses. This allows taxpayers to pay the associated tax over three years, permits taxpayers to recontribute withdrawn funds, and increases the allowed limits on retirement plan loans. Money purchase pension plans have been added the retirement plans qualifying for these temporary provisions. This provision applies retroactively.
MINIMUM AGE FOR DISTRIBUTIONS MADE DURING WORKING RETIREMENT
- Distributions can be made from certain qualified pensions to workers who are 59 ½ or older and are still currently working. For certain construction and building trades workers, the age is lowered to 55.
HEALTH AND DEPENDENT CARE
- Unused amounts in health and dependent care flexible spending arrangements can be rolled over from 2020 to 2021 and from 2021 to 2022.
QUALIFIED PLUG-IN ELECTRIC DRIVE CAR
- For 2020, you may be able to take a credit for a qualified plug-in electric car and alternative fuel vehicle refueling station you purchased. Generally, you can rely on manufacturer’s certification to the IRS that a specific make, model and year vehicle qualifies for the credit, and if applicable, the amount of the credit for which it qualifies. The manufacturer or domestic distributor should be able to provide you with a copy of the IRS letter acknowledging this. If you acquired a vehicle and its certification was withdrawn, you can rely on the certification, as long as, you acquired the vehicle on or before the date of the withdraw. There are credit phaseouts (deductions) once the vehicle manufacturer reaches a certain number sales in the United States. This extends through 2021.
PERMANENT TAX EXTENDERS
- Reimbursed medical expenses that exceed 7.5% of adjusted gross income can be deducted (previously 10%).
RESIDENTIAL (Non-Business) ENERGY-EFFICIENT PROPERTY
- Federal tax credits for certain residential energy-efficient improvements (insulation, exterior doors, windows and certain roofs) and residential energy property costs (qualifying heat pumps; gas, propane or oil hot water boilers; air conditioning systems; gas, propane or oil furnaces and fans; and certain non-solar water heaters) to existing homes have been retroactively extended through December 31, 2021.
- Qualified mortgage insurance premiums (PMI) as an itemized deduction have been extended through December 31, 2021.