With Rocky Mengle, Author and Tax Editor for Kiplinger
This week, Steve spoke with Rocky Mengle, author and tax editor for Kiplinger Personal Finance, about the numerous tax changes stemming from the coronavirus pandemic of 2020. These changes are mostly specific to 2020 and can help you out a lot financially.
Due Dates For Taxes
One of the most important things for tax filers to understand is that the due dates for filing federal taxes have changed. Rocky explained, “Any federal tax due date previously scheduled from April 1st to July 14th has been extended to July 15th. This covers, of course, your income tax and your 1040. It also covers estimated tax payments that would have been due April 15th or June 15th.” Additionally, gift and self-employment taxes, as well as IRA and health savings account contributions for 2019, can be made up until July 15th.
But, let’s say that you’ve already submitted your taxes for 2019. It’s not too late to make a contribution to your IRA, but you will have to file an amended tax return in order to get the credit for the deduction. Rocky added, “And be sure that you tell your IRA custodian that you want that applied to 2019.”
The government’s stimulus checks are designed to help ease the burden many families are feeling in the midst of growing unemployment rates. But what do those checks mean in terms of how you file your taxes? Steve asked Rocky to explain it.
“The money you receive in your stimulus check isn’t taxable; you’re not going to be bumped into a higher tax bracket. In fact, there’s a chance that you might even get a slightly higher tax credit for 2020 because it kind of mirrors the stimulus check calculation. But if your stimulus check isn’t as much as your 2020 tax credit, you’ll get the difference back when you file your return,” Rocky said.
Charitable Donations And Student Loan Payments
With all the craziness and hardship that 2020 has brought, there is some good news in terms of charitable donations and for people who are employed by a company that helps pay off student loans.
Rocky informed listeners, “There’s a new above-the-line tax deduction in terms of charitable donations and you don’t have to itemize. It’s for up to $300 worth of cash donations. This only applies to 2020. On top of that, for people who do itemize, the cap on Schedule A cash donations has been removed. That means you can donate and deduct up to 100% of your adjusted gross income on Schedule A itemized deductions for your 2020 return.” Steve added that this is excellent news for charities that were worried about a drop in donations this year.
The good news doesn’t stop there. Rocky noted that “If you’re lucky enough to have an employer that will pay off some of your student loan, that amount will not be taxable income to you, the worker. It’s capped at $5,250.”
2020 Changes For Retirees
There are some changes this year for retirees as well. Retirees age 72 and over normally have to take required minimum distributions (RMDs) from their retirement accounts. However, the government passed an RMD Waiver for 2020. Rocky said, “You get a break from that this year. For 2020, you don’t have to take any RMDs if you don’t need the money.”
There’s also a great change if you need to take a loan from your 401(k). “There’s usually a cap on how much you can take,” Rocky said. “Instead of only being able to take 50% of the account balance, up until September 23rd of this year, you can take out the full balance.”
And penalties for early withdrawals from retirement accounts have also been relaxed for 2020.