Tax changes to know for 2020

| Feb 2, 2021 | Firm News

Several big tax changes might impact your family in 2020. Reviewing these updates before you tackle your return can prepare you for differences in your potential tax refund or liability.

These are the key changes in federal taxes to know when you file your 2020 taxes this year.

Retirement plan changes

The new SECURE Act increases the age for required minimum distributions from retirement funds from 70 1/2 to 72. In addition, seniors can completely skip RMDs in 2020 without incurring a tax penalty under the CARES Act.

If you have an individual retirement account, you can now make additional contributions even after you turn 70 1/2. If you have or adopt a child, you can withdraw up to $5,000 from your 401(k), IRA or similar retirement fund without the traditional 10% tax penalty.

Increased standard deductions

If you tend to claim the standard deduction, the new numbers for 2020 include:

  • $12,400 for single taxpayers
  • $14,050 for single taxpayers ages 65 and older
  • $24,800 for married taxpayers plus $1,300 for each spouse who has reached age 65

Blind taxpayers can also claim an additional $1,300 standard deduction.

Employer student loan payments

Companies can now pay up to $5,250 toward college loans for their employees. Workers do not have to pay federal income taxes on this payment.

Updated adoption credits

If you adopted a child in 2020, you qualify for a federal tax credit of up to $14,300. If your child has special needs, you can claim the full deduction even if your adoption expenses fall below the maximum. Your company can also pay up to $14,300 toward your adoption.

Review these and other changes carefully when filing your taxes to avoid potential errors that can affect your income.