Recent Tax Laws Passed

New Tax Laws Passed – Extenders, Retirement Changes and more

On December 29th, the President signed into law the Further Consolidated Appropriations Act, 2020. This Act not only prevented a government shutdown, but also passed many tax provisions.

Extenders

The Act passed the following:

• Retroactive reinstatement for the mortgage insurance premium (PMI) deduction and is extended through 2020.
• Retroactive reinstatement for the exclusion of qualified mortgage debt and is extended through 2020.
• Retroactive reinstatement for the above-the-line qualified tuition and related expenses deduction and is extended through 2020.
• Retroactive reinstatement for the construction of energy efficient homes and is extended through 2020.
• The medical expenses deduction returns to 7.5% for 2019 and 2020.
• The employer credit for paid family and medical leave and the work opportunity credit has been reinstated for 2020.

Repeal of three Affordable Care Act provisions

In addition, the Act repeals three ACA-related taxes:

1. The 2.3% excise tax on medical devices will be repealed starting on Jan. 1, 2020.
2. The excise tax on high-cost employer-sponsored health plans, also known as the“Cadillac Tax” will be repealed starting on Jan. 1, 2020.
3. The excise tax on health insurance providers, known as the Health Insurance Tax, will be repealed starting on Jan. 1, 2021.

Changes to retirement plans – The SECURE Act

Starting in 2020, the age for required minimum distributions will be 72. The Act also removes the age limit for contributions to traditional IRAs.
This legislation does not affect the rules for 2019. If you’re at least 70½ in 2019, you must take a required minimum distribution. And you’re not allowed to make contributions to your traditional IRA for 2019 after age 70½.

In addition, starting in 2020, new parents can take penalty-free distributions from a 401(k), IRA or another qualified retirement plan within a year after a birth or adoption.

The Act eliminated the “stretch IRA,” which allowed beneficiaries of IRAs and qualified plans to withdraw all money from inherited accounts over their lifetime. Starting in 2020, distributions must be taken with ten years.

Disaster penalty relief

For retroactive relief, starting Jan 1. 2018, through Feb. 20, 2020, the Act allows individuals who suffer losses in qualified disaster areas to take up to $100,000 from tax-favored retirement plans to help pay for recovery costs without being subject to the 10 percent early withdrawal penalty. The Act also provides an automatic 60-day filing extension; therefore, tax professionals no longer have to wait for the IRS to issue relief rules.

IRS releases new Form W-4

The final version of the 2020 Form W-4, Employee’s Withholding Certificate, is now available. The new W-4 form better incorporates TCJA changes by allowing employees to more accurately estimate the amount of tax they ask their employers to withhold from their paychecks beginning in 2020. In addition, the goal of the new design is to balance simplicity, accuracy and privacy for employees while minimizing burden for employers and payroll processors.

https://www.irs.gov/pub/irs-pdf/fw4.pdf

Retirement 

The Secure Act (Passed by Senate; starting 01/01/2020)

There is a new bill in Congress aimed at improving your retirement. The Secure Act cleared the House back in May and is now in Senate waiting for a vote.  If passed there are some significant changes including:

  • Eliminating the 70 Age limit to contribute to a traditional IRA.
  • Increasing the age from 70 to 72 for required minimum distributions.
  • Requiring inherited IRA’s be withdrawn within 10 years versus over their lifetime.
  • Grant part-time workers benefits that allow them to participate in their company’s 401(k) plan.

To read the full article please click on link …

https://www.cnbc.com/2019/11/20/this-bill-to-improve-your-retirement-is-stuck-in-congress.html

Proposed Bill would allow tax-free 401(k), IRA withdrawals to buy long-term care insurance

A bill currently being discussed in Congress would allow retirement savers to tap assets held in 401(k) plans and individual retirement accounts tax-free to buy long-term care insurance, with the aim of making the insurance more affordable and potentially driving down premiums for customers.

Sen. Patrick Toomey, R-Pa., plans to introduce the bill, which would amend the federal tax code to allow the withdrawal of up to $2,000 of retirement assets annually to pay long-term care insurance premiums and other policy charges.

To read the full article please click on link …

https://www.investmentnews.com/article/20191121/FREE/191129977/bill-would-allow-tax-free-401-k-ira-withdrawals-to-buy-long-term

The Tax Cuts & Jobs Act of 2017 (TCJA)

We try to provide our clients with as much unbiased facts and figures as possible.  As you can imagine, it is not an easy task.  There is a torrent of one-sided articles and misinformation being published and reported on. In that vain the articles below were published by The Tax Policy Center (TPC) which is considered a “nonpartisan” think tank.  TPC combines national specialists in tax, expenditure, budget policy, and microsimulation modeling to concentrate on five overarching areas of tax policy: fair, simple and efficient taxation, social policy in the tax code, business tax reform, long-term implications of tax and budget choices, and state tax issues. 

The Three Numbers To Know About The TCJA In 2018

As tax filing season came to an end, lots of people wanted to know how much the Tax Cuts and Jobs Act (TCJA) affected 2018 federal income tax bills. To see how it changed taxes for specific individuals, you can use the Tax Policy Center’s updated calculator. But how did it affect various income groups?  To read the full article please click on link …

https://www.taxpolicycenter.org/taxvox/three-numbers-know-about-tcja-2018

Anybody Can Itemize Their Deductions. But Most Don’t Want To

It is sometimes said that the Tax Cuts and Jobs Act of 2017 (TCJA) ended the ability of millions of taxpayers to claim itemized deductions, and that itemizing is now only for the rich. But, while the TCJA did make it more beneficial financially for many filers to take the standard deduction, it did not prohibit anyone, no matter their income, from choosing to itemize.

To read the full article please click on link …

https://www.taxpolicycenter.org/taxvox/anybody-can-itemize-their-deductions-most-dont-want

The TCJA Didn’t Change Child Benefits For Most Families With Children By Very Much

The Tax Cuts and Jobs Act (TCJA) significantly changed how families with children were treated under the individual income tax, but for many, changed what they owed in taxes very little.

The (TCJA) doubled the child tax credit (CTC) from $1,000 per child under 17 to $2,000. It also added a $500 credit for older children and other dependents, eliminated the personal exemption for dependents, and made several other changes affecting families with children.

To read the full article please click on link …

https://www.taxpolicycenter.org/taxvox/tcja-didnt-change-child-benefits-most-families-children-very-much