Current Tax News Items

 

2019 Year End Spending Bill

Congress has passed and the President is expected to sign a year end spending bill that incorporates some changes to the tax code

Some of these changes are as follows:

  • Excise tax on certain high-cost employer health plans(so called Cadillac Plans) and the medical devices excise tax are repealed
  • Retirement Plan Changes include an increase in the age for required minimum distributions from 70 1/2 to 72 and requires beneficiaries of IRAs and qualified plans to withdraw all money from inherited accounts within 10 years.  The bill repeals the maximum age for IRA contributions (currently 70 1/2). 
    These changes start January 1, 2020 and anyone that turns 70 1/2 after 12/31/19 will not have to start withdrawals until age 72.
  • Extends expiring tax provisions through 2020 for Sec. 108 which excludes from gross income the discharge of qualified principal residence indebtedness income; the treatment of mortgage insurance premiums as qualified residence interest when income is below certain thresholds; extends the 7.5% (instead of 10%) adjusted-gross-income floor for medical expense deductions; and extends the above the line deduction for qualified tuition and related expenses

Social Security

Monthly social security income benefits increase by1.6% in 2020.  The wage base maximum for social security taxes increase to $137,700

 

2020 AMT

The alternative minimum tax (AMT) exemption for 2020 for married taxpayers filing joint returns will be $113,400 and for single taxpayers $72,900

 

Mileage Rates for 2019 and 2020

The mileage rates for 2019 are 58 cents for business use of an automobile.  

The mileage rates for 2020 are 57.5 cents for business use of an automobile, 17 cents from medical and 14 cents for charitable work.

 

Capital Gains tax rates and Dividends

Capital gains are taxed at 0%, and 20%.  The 0% rate applies to taxpayers otherwise in the tax bracket of 15% or 20% for regular tax purposes.   Taxpayers in the regular tax brackets of 25% or greater have a 20% capital gains tax rate.

 

Dividends received by an individual shareholder from domestic and qualified foreign corporations generally are taxed at the same rates that apply to capital gains.


Estate and Gift Taxes

The Estate and Gift Tax lifetime exclusion is $11,580,000 for 2020.  It will be adjusted for inflation on a yearly basis.

The annual gift tax exclusion is currently $15,000.

 

Standard Deductions

The Standard deduction for 2020 increases to $12,400 for single and to $24,800 for married filing jointly

 

Child Tax Credit

The federal child tax credit is $2,00 per qualifying child under age 17.

 

Miscellaneous Itemized Deductions

Miscellaneous itemized deductions subject to the 2% disallowance has been suspended for years

through 2025.  These deductions may still be deductible for state income tax purposes.

 

State and Local Taxes (SALT)

State and local taxes are limited to $10,000.  Local taxes may still be deductible under state income tax rules.

 

Entertainment and Meals

No deductions are allowed for membership dues of any club organized for business, pleasure, recreation or other social purposes.  Meal and entertainment expenses should be separately classified as business meals continue to be partially deductible.

 

 

 

 

 



Donald C.Hubbard

6507 Pacific Ave. #342

Stockton, CA 95207

 

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