How to take advantage of the latest tax law changes

On Behalf of | Apr 23, 2020 | Tax Issues

The good news: In 2020, you have until July 15 to file your tax returns. The bad news: Tax laws have changed again and are as complicated as ever.

More good news: Some changes may save you and your family money. More bad news: First, you have to understand them.

Medical bills, insurance and natural disasters

Families with high medical expenses are getting a break. You can begin deducting the costs when they reach 7.5% of your adjusted gross income to lessen their impact. Also, the IRS is raising the standard deduction rate for married joint filers from $24,400 to $24,800.

If you did not have health insurance last year, you no longer face a tax penalty of 2.5% of your household taxable income. The Tax Cuts and Jobs Act of 2017 eliminated the penalty for 2019.

Congress also extended recently expired tax breaks that benefit disaster victims. Some, for instance, assist families that sustained losses to hurricanes, wildfires and flooding.

IRA breaks and more

One new IRA rule benefits people who plan on working into retirement. Unlike before, you can contribute to your account past age 70½.

Another IRA change benefits everyone. If your employer offers a 401(k) or 403(b) plan, you can invest up to $19,500. If you are over 50, you can contribute another $6,500. Both are increases of $500.

Some tax breaks are more specific, yet also may help your family. The IRS is making an exception for classifying canceled debt as taxable income. The rule no longer applies when you use canceled mortgage debt to buy a principal home.

Filing taxes is a year-to-year battle. Keeping up with the latest tax law changes is the only way to secure your family’s financial future.

Taking advantage of the breaks

For some taxpayers, itemizing remains a good option. Depending on your circumstances, what you decide can change from year to year.

Another goal is making financial decisions that maximize your tax-free retirement savings. Doing so provides you and your family with the greatest benefits.

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