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  Information for Tax Year 2020

Changes for Tax Year 2020

Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

    - Provides 2020 recovery rebates of up to $1,200 for single and head of household taxpayers and $2,400 for joint filers, phasing out at $75,000 (single), $112,500 (head of household), and $150,000 (joint returns). Taxpayers with children received an additional $500 per child.
    - Waives the 10% early penalty withdrawal for coronavirus-related distributions from retirement plans and provides the option of recontributing the funds for three years after such distributions are made.
    - Temporarily waives the required minimum distribution (RMD) rules for 2020 for defined contribution plans including individual retirement plans.
    - For those who can't itemize deductions, there is an above the line deduction for charitable contributions up to $300.
    - For 2021 and 2022, to encourage restaurant dining, business can write off 100% of business meals.
    - 2019 income can be used to figure the Earned Income Tax Credit for 2020.

Consolidated Appropriations Act 2021

    - Provides an additional refundable tax credit (recovery rebate) of up to $600 for single and head of household taxpayers and $1,200 for joint filers, phasing out at $75,000 (single), $112,500 (head of household), and $150,000 (joint returns). Taxpayers with children received an additional $600 per child.
    - Permanently reduces the AGI threshold for medical expenses from 10% to 7.5%.
    - Allows purchase of PPE by educators as an education expense, limited to $250.
    - " Allows business expenses paid with the proceeds of a forgiven PPP loan to be deductible. However, California does not conform (AB1577).

The SECURE Act, which took effect January 1, 2020 raised the age for the RMD from 70-1/2 to 72. It also allows individuals over 70 to continue making contributions to their IRAs as long as they have earned income. The new 10-year distribution rule requires most non-spousal beneficiaries of retirement plans after Jan. 1, 2020, to distribute the entire inherited account within 10 years of the account owner's passing.

The Tax Cuts and Jobs Act of 2018 repealed the tax penalty on individuals who fail to carry health insurance enacted as part of the Affordable Care Act (ACA). However, California, Massachusetts, Rhode Island, New Jersey, Vermont, and Washington, D.C. have restored the individual mandate. If you did not have minimal health coverage, you could be charged up to 2.5% of household income or $695 per adult, whichever amount is larger.