It’s almost that time of year again. Everyone’s favorite time to reconnect with Uncle Sam! Some of you may be excited to see him and end up with some additional money in your account, some of you may be dreading the thought of him, and others may have no clue how you should feel about him (we should probably talk about tax-planning later this year). As many Americans are starting to sit down and file your taxes for calendar year 2019 I thought now would be a great time to share some of the updates and changes taking place for both 2020 and the Tax Calendar Year 2019.
No Health Care? No Penalties!
2019 is the first year that there will no longer be a penalty of up to 2.5% of a household’s taxable income for not carrying health insurance.
Inherited IRAs
The IRS used to require people who inherit an IRA to withdraw a minimum amount each year and would tie the term of that to life expectancy. However, starting here in 2020, inherited IRAs will need to be drained within 10 years. This is important to review for anyone who has strategized for taxes and with your financial advisor about how inherited IRAs play into your long-term retirement planning.
Higher 401(k)/403(b) Limits
Starting in tax year 2019 you can now invest up to $19,500 a year into your employer’s 401(k) or 403(b) plan. And if you’re over 50, you can contribute up to $25,000 per year.
Higher Standard Deduction for 2020
Starting this year, the standard deduction is increasing to $12,400 for individuals and $24,800 for married joint filers. This will apply when you get your taxes done in 2021 for this calendar year.
Mileage Rates for Business Owners
For calendar year 2019 the mileage rate for businesses was $0.58 cents per mile driven. That will be decreasing to $0.575 cents per mile driven here in 2020. Keep in mind it was only $.545 cents per mile in 2018, so it could be worse!!
Regardless of how prepared you are to file your taxes, remember, It’s All Good!!
Update (3/21/2020): The tax deadline has been extended to July 15th due to the coronavirus pandemic. All 2019 payments and filings due are extended to July 15th without penalties and interests. All Q1 federal estimated quarterly payments for 2020 due on 4/15 are also extended to 7/15. However, please check with your local state for guidelines on these quarterly payments as some are still necessary on 4/15.
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