In the last months of 2019, Congress and the IRS were busy updating, repealing and extending tax law. This is a post you’ll want to pass on to your friends!
Here is a summary of some of the things you’ll need to know:
A number of “tax extender” bills were passed in the last minutes of the year. This extends a number of tax provisions to the end of 2020.
They include extensions for:
Starting in 2019, the age for taking required minimum distribution rises to 72 from 70 ½. Additionally, you can now contribution to traditional IRAs even if you are over the age of 70 ½. (This provides for some interesting tax and estate planning opportunities!)
We still have the residential solar tax credit, but it’s dropped from 30% in 2019 to 26% in 2020. It will drop again to 22% in 2021 and disappear entirely after that. We’ll see similar drops and eventually lose the tax credit for geothermal and residential wind turbines.
The 2020 standard mileage rate has dropped to 57.5 cents per mile for business. The mileage allowance for medical travel and military moves has dropped to 17 cents per mile. Charitable driving mileage rate stays at 14 cents per mile.
You have a choice of either taking the mileage method or the actual expenses times the business use percentage for business miles. There are some limitations. Talk to your tax preparer as to the best strategy for you.
One of the big changes in 2018 as part of the Trump Tax Plan, was the 20% income deduction for qualified business income from pass-through entities. Pass-through entities include Schedule C business, rentals, S Corporations, Partnerships and some Trusts.
If your personal taxable income is over an income threshold amount, the amount of deduction will be limited. The new limitation amount is $326,600 for married, filing jointly and $163,300 for others.
There is also a new tax form, Form 8995, that you need to attach to your individual tax return, Form 1040. If you have a more complicated tax return, you’ll need to attach Form 8995-A.