Tax laws are continually changing, and it’s essential to be aware of all the new regulations, so you file your income taxes correctly and efficiently. By taking advantage of all new tax laws, you can potentially save thousands of dollars on your next tax return. Here are three of the recent income tax changes for the 2020 tax year that will affect many American taxpayers when they file their next return.
Recovery Rebate Credits
The first round of stimulus payments ($1,200 single, $2,400 for couples), along with the second round ($600 per person) are tax free. These Recovery Rebate payments will not add to your 2020 taxable income. As these payments were technically advanced payments, you will have to calculate the amount you should have received. If you are owed more, you can get the difference back in the form of a refund, or a lower tax bill. Best of all, if you were overpaid, you will not need to repay the difference!
Sick and Family Leave Credits for Self-Employed
The new Families First Coronavirus Response Act has tax relief for self-employed people who couldn’t work due to coronavirus. Self-employed people might qualify for tax credits if they were unable to work for a reason that would have allowed them to claim coronavirus-related sick or family leave had they been an employee.
Boost Your Retirement Savings
For those saving for retirement, the IRS has increased the employee contribution limit for 401(k), 403(b), and most 457 plans to $19,500, from $19,000 in 2019. For those over 50, the catch-up contribution limit has been raised to $6,500, from $6,000 in 2019.
Not being aware of changes in income tax laws could have you leaving thousands of dollars on the table. To make sure you maximize your refund, consider having your taxes done by a professional tax expert who will know all the relevant tax laws for your situation.
At Georgen Scarborough Associates, PC, we provide various accounting and tax services to people in Virginia, Maryland, and District of Columbia (DC). We provide tax preparation services for individuals, families, estates and trusts as well as other accounting services. If you need help or advice filing your tax return, please contact one of our tax preparation experts today.