The new year brings may changes to the tax rules:
Deductions:
The standard deductions that is now taken by most taxpayers has risen to $24,800 for married couples, plus $1300 for each spouse age 65 or older. Singles can now claim $12,400 and an additional $1,650 if 65 or older. Head of household filers get $18,650 plus an additional $1,650 if 65 or older.
The 20% deduction for Qualified Business Income (QBI) is still in effect and the income threshold has risen to $326,600 for joint filers and $163,300 for others. This is good news if you are self-employed or own a pass-through business like an LLC or S-Corp. Although there is now an additional form that has to be attached to your 1040 to get the deduction.
Employment Issues:
The Social Security annual wage base has risen by $4,800 to $137,700. This means that more of your employment income will be subject to Social Security taxes.
The W-4 form has been revamped. It is not required that you file a new W-4 with your employer, but it is probably a good idea to make sure your tax withholdings are right.
Retirement:
The beginning age for taking the required minimum distributions (RMD) from your retirement plan rises from 70.5 to 72 if you turned 70.5 after 2019.
Starting with 2020, taxpayers can make traditional IRA contributions past the age of 70.5.
The maximum contribution caps for 401(K), 403(b) and 457 plans have risen to $19,500. Taxpayers born before 1971 can contribute an additional $6,500.
There are a variety of other changes that may affect you so contact me to stay informed.
I help clients reduce taxes, increase profitability, meet reporting requirements, and save valuable time. Contact me to find out how!
