{"id":174,"date":"2020-12-10T21:35:06","date_gmt":"2020-12-10T21:35:06","guid":{"rendered":"https:\/\/www.mckaytax.com\/blog\/?p=174"},"modified":"2020-12-10T21:35:06","modified_gmt":"2020-12-10T21:35:06","slug":"mckay-tax-annual-letter-2020-tax-update","status":"publish","type":"post","link":"https:\/\/www.mckaytax.com\/blog\/mckay-tax-annual-letter-2020-tax-update\/","title":{"rendered":"McKay Tax Annual Letter: 2020 Tax Update"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Most of the COVID-related tax changes were related to the extension of your 2019 tax year filing. However, there are some tax strategies that are still available until the end of the year.\u00a0\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">COVID-19 Tax Strategies Still Available:<\/span><\/h2>\n<p>&nbsp;<\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">2020 401k and IRA distributions up to $100,000 can be taken penalty-free and you can pay the regular tax over three years or have it nontaxable if you make a re-contribution (\u201cput it back\u201d) within three years rather than the normal 60 days.\u00a0\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Minimum retirement account distribution (taxpayers over 70\u00bd years of age) can be ignored for 2020.\u00a0\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">If you did not get a stimulus 2020 check and qualified based on your 2020 tax return there is a reconciliation in the 2020 tax return that could give you more money.<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">2020 Standard Deduction Guidelines:<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The new 2020 standard deductions are $12,400 single, $18,650 for the Head of Household, and $24,800 for those filing as Married\/Jointly.\u00a0 The Child Tax Credit remains the same at $2,000 for dependents under 17 and $500 for dependents over 16.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Here are a few things to think about for year-end tax planning:<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">\u00a0<\/span><span style=\"font-weight: 400;\">Charitable Donations<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you think that you will itemize and you need to make a trip to the DI or Salvation Army do so before December 31st. Be sure to get a receipt and write the items and value of each item on the receipts.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Some taxpayers strategize by bunching charitable deductions in one year. This means they itemize one year and take the standard deduction the next year.\u00a0 To do this you would wait to pay your 2020 charity or make 2020 donations.\u00a0 Instead, make your donations in January 2021 and make any additional 2021 donations by December 31, 2021, to include your donations in one year. This will give you twice the deduction in one year and allow you to take the standard deduction on your off year.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">You could also do this with other itemized deductions, such as medical expenses if you can manage them into a specific calendar year.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Without itemization, you can deduct a maximum of $300 if you gave it to a qualifying charity.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">IRA Deduction<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Depending on your income, you may be able to get a deduction for an IRA contribution for 2020 of up to $6,000 (or $7,000 if you are over 50 years old). Your IRA deduction will count even if you wait until tax filing day in 2021 (Thursday, April 15, 2021).\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you are over 70\u00bd years old and choose to take a 2020 distribution from your IRA account, you can make that distribution payable to the charity of your choice tax-free.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Stock Sales<\/span><\/h3>\n<h2><span style=\"font-weight: 400;\">If you have a few underperforming stocks that you wouldn&#8217;t mind unloading, now is the time. If you have them, you can sell your stocks at a loss to offset any capital gains you may have for profitable stock sales throughout the year. If you end up with a capital loss, you can carry that loss for later years and even write off up to \u00a0 $3,000 against your normal income for the year.<\/span><\/h2>\n<h3><span style=\"font-weight: 400;\">Flex-Spending Accounts<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">This time of the year is when employees must specify how much salary they will set aside in Flex Spending Accounts (section 125) for medical and child care expenses.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Using flex funds to pay for medical and child care expenses save federal and state taxes but also saves an additional 7.65% in FICA and Medicare taxes.\u00a0 Be sure to estimate medical and child care expenses low. Extra money left in your Flex Spending Accounts at the end of the year is lost.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">Retirement<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Please call me for the answers to your questions about early distributions from a retirement fund or planning your retirement. A simple phone call may save thousands of dollars in additional taxes and penalties.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As always feel free to call me anytime for answers to your tax questions (including major events) at no additional cost.\u00a0 Look for your appointment confirmation and questionnaire to come in the mail by January 5th or sooner.<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Have a Merry Christmas and Happy New Year!<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Sincerely<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Rich McKay<\/span><\/p>\n<p><span style=\"font-weight: 400;\">801-731-1857<\/span><\/p>\n<p><span style=\"font-weight: 400;\">RMcKay@McKayTax.com<\/span><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Most of the COVID-related tax changes were related to the extension of your 2019 tax year filing. However, there are some tax strategies that are still available until the end of the year.\u00a0\u00a0 COVID-19 Tax Strategies Still Available: &nbsp; 2020 401k and IRA distributions up to $100,000 can be taken penalty-free and you can pay &hellip; <\/p>\n<p><a href=\"https:\/\/www.mckaytax.com\/blog\/mckay-tax-annual-letter-2020-tax-update\/\" class=\".blog article .post-content .button\">Continue reading<span class=\"screen-reader-text\"> &#8220;McKay Tax Annual Letter: 2020 Tax Update&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":176,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[15,16],"tags":[],"_links":{"self":[{"href":"https:\/\/www.mckaytax.com\/blog\/wp-json\/wp\/v2\/posts\/174"}],"collection":[{"href":"https:\/\/www.mckaytax.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mckaytax.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mckaytax.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mckaytax.com\/blog\/wp-json\/wp\/v2\/comments?post=174"}],"version-history":[{"count":1,"href":"https:\/\/www.mckaytax.com\/blog\/wp-json\/wp\/v2\/posts\/174\/revisions"}],"predecessor-version":[{"id":175,"href":"https:\/\/www.mckaytax.com\/blog\/wp-json\/wp\/v2\/posts\/174\/revisions\/175"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.mckaytax.com\/blog\/wp-json\/wp\/v2\/media\/176"}],"wp:attachment":[{"href":"https:\/\/www.mckaytax.com\/blog\/wp-json\/wp\/v2\/media?parent=174"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mckaytax.com\/blog\/wp-json\/wp\/v2\/categories?post=174"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mckaytax.com\/blog\/wp-json\/wp\/v2\/tags?post=174"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}