WHAT'S NEW IN TAX CODE?
Standard deduction amount increased
For 2029 & 2020, the standard deduction amount has been increased for all filers, and the amounts are as follows.
Single or Married Filing Separately— $12,400.
Married Filing Jointly or Qualifying Widow(er)— $24,800.
Head of Household— $18,350.
65+ or Blind— $1,300
65+ or Blind Single— $1,650
Due to the increase in the standard deduction and reduced usage of itemized deductions, you may want to consider filing a new Form W-4.
Deduction for personal exemptions suspended
For 2018 & 2019, you can’t claim a personal exemption deduction for yourself, your spouse, or your dependents.
Changes to itemized deductions
For 2018, 2019 & 2020, the following changes have been made to itemized deductions that can be claimed on 1040.
Your itemized deductions are no longer limited if your adjusted gross income is over a certain amount.
You can deduct the part of your medical and dental expenses that is more than 7.5 percent of your adjusted gross income.
Your deduction of state and local income, sales, and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if married filing separately).
You can no longer deduct job-related expenses or other miscellaneous itemized deductions that were subject to the 2 percent of AGI floor. You may still deduct certain other items on Schedule A, such as gambling losses.
For indebtedness incurred after December 15, 2017, the deduction for home mortgage interest is limited to interest on up to $750,000 of home acquisition indebtedness. This new limit doesn’t apply if you had a binding contract to close on a home after December 15, 2017, and closed on or before April 1, 2018, and the prior limit would apply.
You can no longer deduct interest on home equity indebtedness, which means indebtedness not incurred for the purpose of buying, building, or substantially improving the qualified residence secured by the indebtedness.
Changes to 1040
For 2019 & 2020, As part of a larger effort to help taxpayers, the Internal Revenue Service plans to streamline the Form 1040 into a shorter, simpler form for the 2019/2020 tax season.
The new 1040 (PDF) – about half the size of the current version – would replace the current Form 1040 as well as the Form 1040A and the Form 1040-EZ.
For calendar year 2019, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is 0, per the Tax Cuts and Jobs act.
JANUARY 1, 2021
Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Your payments of SE tax contribute to your coverage under the social security system.
Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.
Generally, you must pay SE tax and file Schedule SE (Form 1040) if either of the following applies.
If your net earnings from self-employment were $400 or more.
If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from Social Security and Medicare taxes, you are subject to SE tax if you receive $108.28 or more in wages from the church or organization.
December 7, 2020