STANDARD MILEAGE RATES FOR 2020 business mileage 57.5 cents, medical & moving 17 cents & charity 14 cents. The 2021 standard mileage rates will be Business mileage 56, medical & moving 16 cents and charity 14 cents.
RULES FOR CHARITY DONATIONS – No change….For ALL donations of cash, you must have a cancelled check, a receipt or acknowledgement and for amounts over $250 you MUST have BOTH. For non-cash donations you must have a receipt and all donated clothing and household items must be in good condition…take a picture to show condition!
RETIREMENT SAVINGS (IRA) – No change…For 2020 and 2021 you can contribute up to $6,000 & if you are over 50…$7,000. This deduction is limited to the lesser of your contribution or your earned income. Contributions MUST be made before April 15th.
SALES TAX DEDUCTION – The tax deduction for state and local sales taxes was extended for 2020 & 2021, including sales tax paid on a new motor vehicle. You can deduct the sales tax or income taxes paid whichever is higher.
ESTATE & GIFT TAX – The estate tax exemption increase to $11,580,000 for 2020 and $11,700,000 for 2021…after the exemption amounts estates are taxed at 40%. The gift tax annual exclusion remainss to $15,000 for 2020 and 2021. Above these amounts there is no additional tax…but the gift must be reported to the IRS. If the gift is made for someone else’s educational cost (for tuition only and made directly to a qualified education institution) the gift is non-taxable.
HEALTH INSURANCE PENALTY – For 2020 California reuies health coverage for the entire year or pay a penalty. In 2020 the penalty for not having health coverage will be $750 per adult and $375 per child in the household.
PHASEOUTS ARE BACK – No AGI phase-outs for itemized deductions in 2020. Personal exemptions are eliminated and the standard deductions have been increased to…Married Joint, $24,800, if over 65 $27,400 and Single and married filing separate will be $12,200. Head of household will be $18,650, $20,300 if over 65.
ENERGY CREDITS – Energy credits for 2020 have been extended through December 31, 2020. You may be able to claim a 30% tax credit (with no upper limit) for the purchase of qualified solar energy, small wind turbine systems and fuel cells for your home. The unused portion of the credit may be carried over to future years.
TAX CREDIT OR DEDUCTION – This deduction allows you to claim up to $4000 of qualified higher educaiton tuition and fees. This deduction isn’t a tax credit instead it’s an adjustment to income. The Lifetime Learning Credit is worth up to 20% of the first $10,000 of expenses, or a maximum of $2,000 per return, phased out if your adjusteed gross income exceeds certain levels. No portion of the LLC is refundable. To claim this credit you MUST have a form 1098-T from the educational institution.
SOCIAL SECURITY TAX – Social security taxable wage limit increased to $137,700 for 2020 and $142,800 for 2021. The social security tax rate for 2020 was 6.2% for employees and employers. Medicare tax rate for both employers and employees was 1.45%…with no maximum. For 2020 retirees under full retirement age can earn up to $18,240 without losing benefits, in 2021 the limit increases to $18,960.
DUE DATE OF TAX RETURNS – The due date for 2020 tax returns will be Thursday, April 15, 2021.