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Financial Facts
Every year tax laws change; it can be for better or worse depending on an individuals financial situation. Build & Grow will continuously update this page with fun facts about new tax laws or changes in current tax laws and regulations.
Did you know?
Every year, inflation adjustments lift the amount that taxpayers are eligible to take as standard deductions. For tax year 2020 the following deductions were adjusted:
The standard deduction for married filing jointly rises to $24,800 for tax year 2020, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,400 for tax year 2020, up $200, and for heads of households, the standard deduction will be $18,650 for tax year 2020, up $300.
What does this mean?
Filers, each year, will have the opportunity to choose between their expenses and the standard deduction, whichever is higher. Particularly, Itemize deductions includes but may be limited to; mortgage insurance, charitable contributions, and health expenses. Depending upon the client's situation, itemizing helps with the possibility of tax savings throughout the course of the year or the standard deduction could be more beneficial.
Non-Itemizers
More donations can be deducted for 2020 under the CARES Act. The new "above-the-line" deduction for taxpayers who don't itemize, may write off up to $300 of charitable cash contribution.
Itemized Deductions
Many itemized deductions were either eliminated or restricted in 2018 through 2025. Between this and the increased standard deduction, the amount of individuals who itemize will decrease.
State and Local Taxes (SALT)- Taxpayers may still deduct state and local real estate, personal property, and either income or sales taxes. However, the amount is capped at $10,000.
Medical Expenses- Taxpayers may deduct unreimbursed medical expenses that exceed 7.5% of their AGI rather than the 10% from 2018.
Charitable Contributions- Due to Corona Virus the CARES act temporarily suspended the limit on charitable contributions , and increased the limit of the contribution of food inventory.
Other itemized deductions- In 2018 the Tax Cuts and Job Act eliminated deductions for unreimbursed employee expenses, tax preparation fees, and other miscellaneous expenses.
Child Tax Credit & Credits for Additional Dependents
In 2018, child tax credit was increased to $2,000 per child. Up to $1,400 of your credit can be refundable or this amount can decrease your tax liability.
Any additional qualified dependents over the age of 17 being claimed will receive a $500 credit. This applies to mother-in-laws, adults with a disability, etc.
Economic Impact Payment
Due to COVID-19 the government decided to allow U.S residents to receive the Economic Impact Payment of $1,200 for individuals and $2,400 for couples. This payment applies to household filers and married filing jointly individuals who are not dependents of another taxpayer or have a work eligible Social Security number. In order to qualify for this stipulation taxpayers must have an Adjusted Gross Income up to:
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$75,000 for individuals
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$112,500 for head of household
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$150,000 for married filing jointly