Thursday, January 23, 2020

2020 Tax Season: What You Need to Know

Tax season begins this year on Monday, January 27, 2020. This is the first day that the IRS will start accepting and processing 2019 tax year forms. The Military Families Learning Network personal finance team recently held a webinar called Tax Updates: New Year, New Forms, New Thresholds. Below are some key highlights:

¨      In 2019, the penalty for lacking health insurance is $0. There are no longer any shared responsibility payments.

¨      Itemizing tax deductions is much rarer today (about 10% of taxpayers) than it was before the Tax Cuts and Jobs Act (TCJA) passed. Miscellaneous deductions are gone and state and local taxes, combined, are capped at $10,000. Most remaining tax itemizers have high mortgage interest payments and/or charitable donations.

¨      The TCJA doubled the child tax credit to $2,000. Eligibility rules are the same this tax season with one major addition. The children for which the credit is taken must have a Social Security number. The child tax credit cannot be claimed anymore with an ITIN (individual taxpayer identification number).

¨      The 1040 tax form looks different…again. It is longer than last year (no longer postcard size) and has three supplemental schedules instead of six. There is also a new 1040-SR form for taxpayers age 65 and older.

¨      The chained CPI (Consumer Price Index) in effect as a result of the TCJA has resulted in smaller inflation adjustments for tax-related items. While the changes are subtle on an annual basis, they will add up over time.

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