Tax Information for Americans At Home
While there has been talk for many years about the possibility of a flat tax or tax returns the size of a postcard, that is not yet the reality. Instead, the tax code has continued to change, evolve and become more complicated. Every taxpayer’s situation is unique and we are always ready to assist you with individual consults, but the following is a little information on the topics we are addressing most often this year.
- Stimulus Tax Credit—Otherwise known as the Economic Impact Payment, the coronavirus stimulus payments sent out in 2019 were technically a tax credit for 2020 taxes. This payment is treated as a refundable tax credit and will not be taxed as income on your 2020 tax return, nor will it be deducted from your refund. This item will be of special interest to those who did not receive a stimulus check, whether due to not having filed taxes in 2018 or another reason. It will likely be to your benefit to file for 2020, if you would like to claim this refundable credit.
- Itemized Deductions—The Tax Cuts and Jobs Act increased the individual deduction to $12,200 for 2019, resulting in a vast majority of taxpayers no longer needing to itemize. Most people breathed a big sigh of relief to be able to stop saving every medical receipt and track down annual mortgage interest and property tax statements, because few people have itemizable expenses exceeding this increased deduction. Self-employed individuals, especially those with home offices, may continue to find itemizing beneficial, but for most, taxes have become a little less complex. The individual deduction for 2020 will rise to $12,400.
- Earned Income Tax Credit—This is a refundable credit for working people which pays a refund, even if taxes are not owed, if you have dependent children, a low to moderate income within certain ranges and do not have investment income exceeding $3,600.
- Child Tax Credit—This is a credit of up to $2,000 per child and is refundable for $1,400 per child. In order to qualify for this credit, you must have an income of at least $2,500 and doesn’t begin to phase out unless your income is over $200,000.
- The ACA and Healthcare—For 2019, the individual mandate was removed so only those with Affordable Care Act health plans are required to report their healthcare coverage. Because these plans are reconciled with your income on your taxes, it is important to accurately estimate your income if you are accepting subsidies toward your health coverage. If your income was higher than estimated, you will be required to repay any subsidy overpayments at tax time. Make sure you review your subsidy annually with your healthcare provider to ensure you do not get hit with a surprise healthcare reimbursement at tax time.