A lot of people are getting their papers ready for the 2020 tax season. However, before we all get started on our taxes, let’s go over what changes were made to the tax code since last year!
Tax Breaks That Are No Longer Available
Moving: Unfortunately, moving expenses no longer count as tax-deductible. However, there is an exception: moving due to military orders to a permanent location. Active-duty military can deduct their costs of traveling, moving their furniture and things, and even finding a new home. As for relocating due to a regular job request, according to current law, all the moving expenses should be paid for with wages. As a result, spending on a move falls under employment taxes.
Employment: Tring to find a new job? Unfortunately, you’ll have to pay out of pocket. Starting in 2020, no one can deduct job-seeking expenses. Meanwhile, currently employed folks can also no longer allowed to deduct unreimbursed expenses that they incur for work. “If you’re in this situation, you may want to speak with your employer about possibly creating an accountable reimbursement plan,” says Andy Phillips, director of H&R Block’s Tax Institute. Finally, for everyone in the gig economy, you can now get help regarding taxes and documentation directly from IRS themselves at www.irs.gov!
Personal: Here’s a heartbreaker: did you experience any theft last year? Well, unfortunately, forget about deducting it! The only exception is “presidentially declared disaster area related” personal casualty losses. So, if someone broke in during a hurricane or you lost something during a tornado, you’re all good. Everyone else, sorry!
New And Returning Tax Breaks
Mortgages: This one will come as a significant relief to anyone who has dealt with a terrible mortgage recently. In 2020, if you’ve faced foreclosure in the past decade and had anywhere up to $2 million in mortgage debt forgiven, you no longer need to report that forgiven debt as income. This comes as many are still trying to deal with the effects of the 2008 housing crash.
Medical expenses: Understandably, some families want their big medical bills covered entirely by the federal government. While that hasn’t quite happened yet, Congress has passed a new tax break aimed at helping those that have high medical expenses year after year. In 2020, even more qualified medical and dental expenses will become tax-deductible. Just be careful with the process, as they’ll need to exceed 7.5% of your adjusted gross income.
Education: For the first time ever, tax-payers can use their heir above-the-line tax deduction of up to $4,000 for qualified college tuition and fees. Singles who have a modified adjusted gross income up to $65,000 and married with the income up to $130,000 and filing a joint return can deduct up to $2,000. However, we should state: these deductions are not available to those who took the American Opportunity or Lifetime Learning Credits. If you don’t know what those are, you’re probably fine, but it’s always best to check with a financial advisor to be safe.
Finally, looking ahead to the not-so-distant future, Ric Edelman, the co-founder of financial advisory firm Edelman Financial Engines, said recently to expect to see taxes grow in the near future. “It will be a dominant issue in the 2024 campaign, and the answer will be determined by who’s president when the tax cuts expire.”
Sources: USA Today, Yahoo! Finance