Tax season is right around the corner and before the end of 2020, you may consider spending a little time to plan out your 2020 taxes. At J2 Capital, we encourage all our clients to proactively discuss tax planning opportunities that may be available.
If your taxable income is down considerably in 2020, maybe it is a good year for a Roth Conversion to take advantage of the lower rates. Likewise, if you believe our tax rates will be much higher in 2021 vs. 2020. In terms of capital gains, J2 will already review your non-IRA accounts for tax-loss harvesting if needed. Since we also offer tax preparation, the tax-loss harvesting will be personalized to incorporate any capital loss carryforward that is available to you.
That being said, the following items point out some relevant changes for 2020.
1.) Recovery Rebates
- Under the CARES Act, most Americans received a direct economic recovery rebate check of $1500. This rebate is technically an advanced payment of a special 2020 tax credit. You can reconcile your rebate on your 2020 return. In most cases, the rebate will equal the tax credit allowed but if your credits exceed your rebates you can claim the balance on your 2020 returns.
2.) Required Minimum Distributions
- The CARES act has also allowed seniors to skip their RMD's for the year 2020 without penalty. It also waives the 10% penalty on pre-age 59 1/2 payouts from retirement accounts for up to $100,000 of coronavirus-related payouts.
3.) Tax Bracket Changes
- Rates haven't changed but the brackets got wider than last year.
4.) Standard Deductions
Standard deductions have been raised for 2020.
- Married couples can claim $24,800
- Singles can claim $12,400
- Head-Of-Household filers get $18,650
5.) Sick and Family Leave Credits for Self-Employed
- Tax credits are also being allowed for the self-employed who have been negatively affected by COVID-19. They can now also receive tax credits against the self-employment tax similar to the ones allowed for regular employers.
If you are not yet a client of J2 Capital we would love to chat about your tax situation.