Last-minute TAX TIPS
IRS payments can be deferred
The coronavirus crisis has brought some changes to tax season. Treasury Secretary Steven Mnuchin said Tuesday that individuals will be able to defer up to $1 million in tax payments to the IRS for 90 days.
For those who haven’t filed yet, here are some tips when doing your taxes:
Standard deductions: The basic standard deduction is now $24,400 for married persons filing jointly and qualified surviving spouses ($25,700 and $27,000 respectively for married couples with one or two spouse aged 65 and over); $18,350 for heads of households ($20,000 for those 65 and over); and $12,200 for single taxpayers or married persons filing separately ($13,850 for those 65 and over).
State and local taxes: There is cap of $10,000 of the itemized deduction for state and local taxes.
Self-employment tax: The tax rate has two components. The Social Security component is a tax of 12.4% of wages, tips and earnings up to $132,900. The other component is a Medicare tax of 2.9% withheld from all wages, tips and earnings. However, half the self-employment tax may be claimed as an above-the line deduction on Schedule 1 of Form 1040.
IRA and Roth IRA contributions: The contribution limit for traditional IRAs and Roth IRAs is increased to $6,000; $7,000 for those 50 and older.
The deduction limit for traditional IRA contributions is phased out for single persons or heads of household between modified adjusted gross income $64,000 and $74,000. For married persons filing jointly and qualified widow(er)s, the phaseout is between MAGI $103,000 and $123,000. The phaseout for a spouse who is not an active plan participant, but whose spouse is between a MAGI of $293,000 and $203,000.
The Roth IRA contribution limit is phased out for a single person or head of household with MAGI between $122,000 and $137,000; for married persons filing jointly and qualified widows and widowers, the phaseout is between $193,000 and $203,000.
Qualified business income deduction: If you are a sole proprietor, or have an interest in a partnership, limited liability company or S corporation, you may be eligible for a personal deduction. This deduction can be made whether you itemize or not. The taxable income amount used to figure the deduction has been increased for inflation.
IRS mileage allowance: The standard business mileage rate is 58 cents a mile. The rate for medical expense and moving expense for some military personnel is 20 cents a mile. The mileage rate for charitable volunteers is unchanged at 14 cents a mile.
Health savings accounts: For selfonly coverage, the minimum deductible is $1,350, and a maximum out-ofpocket cap on co-payments and other amounts of $6,750. For family coverage the limits are double ($2,700 and $13,500).
The contribution limits are $3,500 for self-only coverage and $7,000 for family coverage. If you are 55 or older, you can add an additional $1,000.
Earned income tax credit: The maximum credit is $3,526 for one qualified child; $5,828 for two qualified children; and $6,557 for three or more qualified children; and $529 for taxpayers with no qualified children.
Eligibility for saver’s credit: The adjusted gross income brackets have been increased. No credit is allowed when AGI exceeds $32,000 for single taxpayers, $48,000 for heads of households and $64,000 for married persons filing jointly.
Deduction limits for long-term care premiums: The maximum amount of premiums that can be included as deductible medical expenses is $420 if you are 40 or younger at the end of 2019; $790 for ages 41 through 50; $1,580 for ages 51 through 60; $4,220 for ages 61 through 70; and $5,270 for those over 70.