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    Tax Season | 4 min read

    Crushing Your 2020 Taxes: What’s New & Important Deductions

    Not to be rude and bring up 2020, but before we can put the year fully behind us and move on for good, you’ve got one last task to tackle—filing your 2020 taxes. With the deadline to file coming up on April 15, now is the best time to start organizing paperwork and evaluating your situation so the process can go smoothly.

    In this blog post, we’ll let you know what’s new this tax season, and highlight important deductions you may be eligible for.

    Increased Minimum Penalty for Not Filing Taxes

    Passed at the end of 2019, the Setting Every Community Up for Retirement, or SECURE act, increased the minimum penalty for not filing your taxes on time from $330 to $435. According to SchneiderDowns, “the change impacts only the minimum monthly penalty for late filing and not the aggregate cap of 25% of any taxes due.”

    Increased Standard Deductions

    When you file your taxes, you can either itemize all of your deductions, or take the standard deduction. Taking the standard deduction saves time and hassle, and thanks to a tax reform bill in 2017, it is typically high enough that itemizing deductions is not necessary.

    The available standard deduction for all filers has increased slightly for the 2020 tax year to account for inflation:

    Filing Status

    2019

    2020

    Single

    $12,200

    $12,400

    Married Filing Jointly

    $24,400

    $24,800

    Married Filing Separately

    $12,200

    $12,400

    Head of Household

    $18,350

    $18,650

    According to Forbes, more than 90% of taxpayers are expected to take the standard deduction for 2020. It’s certainly the less complicated option, and not having to add up expenses and find receipts makes filing less of a hassle. That said, you should still check with your tax advisor to see if you could benefit from itemizing your deductions.

    Important Deductions to Consider

    Tax deductions can help lower your tax bill by decreasing the amount of your income that is subject to federal income tax. Here are some important tax deductions you may be able to claim on your 2020 taxes:

    1. Charitable Deductions

    In previous years, you could only deduct contributions to charity from your income by itemizing your deductions. However, according to the IRS, “Taxpayers who don't itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. The CARES Act also temporarily suspends limits on charitable contributions and temporarily increases limits on contributions of food inventory.”

    When making deductions for donations, you’ll want to keep these rules in mind:

    • The IRS only allows you to deduct donations made to tax-exempt organizations.

    • Cash or other donations must have been made by December 31 of the tax year for which you're filing.

    • When donating clothing, household goods, or other non-cash personal property, you must list the fair market or resale value as your deduction amount.

    • If you make a donation to receive something of value in return, you must subtract the value you received from your listed donation amount.

    Related Reading: How Charitable Giving Can Impact Your Tax Bill

    2. Deductions for Medical Expenses

    Medical expenses can sometimes be crushing. If you have substantial medical bills from 2020, you may be able to get some relief on your taxes. The IRS provides a full list of eligible medical and dental expenses online, but here are some common categories:

    • Fees paid to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and other medical practitioners

    • Inpatient hospital care and residential nursing home care needed for medical purposes; includes cost of meals and lodging

    • Medical insurance premiums, dental insurance premiums, and long-term care insurance; excludes premiums paid by taxpayer's employer and pre-tax portion of employee health insurance premiums

    According to Dave Ramsey, “You can deduct any medical expenses above 7.5% of your adjusted gross income (AGI), which is your total income minus other deductions you have already taken. For example, if your AGI was $100,000, you can deduct out-of-pocket medical expenses above $7,500 in 2020. But you have to itemize your deductions in order to write off those expenses on your tax return.”

    Related Reading: Don’t Miss Out on Deducting Medical Expenses from Your Taxes

    Nobody likes filing and paying taxes, but it’s best to be prepared. The more informed you are about the process, the less stressful it will be. Keep an eye out for our upcoming post on which tax credits you can take advantage of by subscribing to our PersonalHub blog.

    SWBC does not provide legal advice on tax laws or regulations. Please consult a tax professional for specific advice about your situation.

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    Tax Season

    Amanda Harr

    Amanda Harr is a Marketing Content Writer at SWBC. She uses a structured creative process to craft marketing strategies and develop communications solutions.

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