New year is here, and tax season is coming fast. Tax changes made in 2017 are still taking into effect. The tax season is here, and finally, you will file the taxes in April 2020. There are many things which have changed. What you had registered last year will be completely different from what you expected to file this year. We are going to cover it. So, you prepared in advance. You can use a Federal Tax 2020 if you find calculating your taxes too complicated. The aspects which will get affected are from retirement account contribution to standard deductions. So, here we are going to present those changes, we are sure it will help you in planning for filing taxes. The best way to begin is by gathering your documents.
The Individual Mandate Penalty | Federal Tax
When the tax code changes made in 2017, they started to take effect in 2018. But, there was one exception to it. It was the shared responsibility payment, which finally took effect in 2019. The shared responsibility act which is also known as the individual mandate penalty related to health insurance. It is for those folks who needed health insurance under the affordable care. But, they could not get the coverage or were not able to qualify for an exemption. So, there was a penalty for it. You had to pay for it with your taxes. But in 2019, it is no longer a penalty. Thus when you file taxes in 2020, you won’t have to pay for it.
The Case of Alimony Deduction in Federal Tax
With the tax cuts and jobs act, the alimony deduction eliminated in 2019 rather than in 2018. When there is a divorce or separation, there will be no alimony deduction as per the IRS publication 5307. As we said, it will apply this year, not in any previous year. So, let’s take an example if there is a spouse who is getting divorced. If there is alimony for getting paid in 2019. Then the payment could not write with a tax off in 2020. It also means if the payment received in 2019, it could not cite as Income Tax Refund 2020 when filing taxes.
The Retirement Account Contributions
As you know, there are many ways of contributing to retirement. There is an IRS retirement account, and there is a private retirement account. Changes in 401(K0 and the IRS retirement plan. Now, the contribution amounts limits have changed as well. They are as follows. The 2019 contribution limits include: 401(k) base contribution: $19,000 (up from $18,500 in 2018),401(k) catch-up contribution (for taxpayers age 50 and older): more $6,000 (unchanged),IRA base contribution: $6,000 (up from $5,500), IRA catch-up contribution (for taxpayers age 50 and older): extra $1,000 (unchanged). Four kinds of retirement plans for a workplace. They are as follows.401(k) plans,403(b) plans, Most 457 plans, Thrift Savings Plan.
The Contributions to Health Savings Account
If you are paying taxes for a long time, you should know that contributing to HSA accounts are a great way to save money. But, one should not treat them as a retirement savings account. But you can use them as a retirement account. There are many reasons for it. First, they are tax-free. Seconds they are more versatile than FSAs(Health Flexible Spending account). The third way is, you can contribute way more than a regular retirement account. These are the biggest benefits of an HSA account. Contributions have been increasing for 2019. For coverage: $3,500 (up from $3,450 for 2018) and for Family coverage: $7,000 (up from $6,900).
The Case of Higher Standard Deductions
The standard deductions are but higher for 2019. As per the IRS, there are changes. For Married filing : $24,400 (up $400 from last year). For Married filing : $12,200 (up $200). For Head of household: $18,350 (up $350) and for Single: $12,200 (up $200)
So, these are some of the changes made in the 2020 tax season. We are sure they will help you if you find calculating taxes too complicated. It would be better to use a tax calculator in 2020. Make sure the Tax Calculator you will use has all the latest changes.