Top tax law changes that could affect you when filing in 2020

The new year 2020 is near and the thought of a new year not only fills us with ideas of what we will accomplish for this upcoming year and is the beginning of a fresh start. It also raises questions about how our taxes will look like this year and what changes may happen that can affect us.

For this reason, we will be going over a few ways how we may be affected by the new changes to the tax law for tax season 2019. First, let us take a look at some of the changes we noticed in tax season 2018:

• Our take-home paycheck became larger.
• The child tax credit was doubled, therefore increasing the amount of some refunds.
• Some Taxpayers were surprised with a larger tax bill or lower refund.
• The standard deduction was increased, benefiting those with a lower income by reducing most of all of their tax bill.
• Small businesses paid less in taxes and received an additional net income deduction.

Now let’s take a look at some of the changes we should expect in tax season 2019. So, when you file your taxes in early 2020, you won’t be surprised by a higher tax bill or money you will be leaving on the table. These changes should hopefully benefit you and your household.

1. The Obama Care (Affordable Care Act) penalty for not having insurance is gone.

That doesn’t mean that the Obama Care is gone. The Affordable Care Act is still the law of the land, but you can’t be penalized for not having health insurance. It’s kind of like if speed limits were optional, so don’t go dropping your insurance coverage due to these changes.

Although it isn’t any longer a requirement, it surely is something needed to cover for any unfortunate events that may impact your health.

2. A higher medical expense deduction threshold.

This means that medical expenses need to be above the 10% adjusted gross income threshold for you to claim it. For example, if your adjusted income is $50,000, your medical expenses must be above $5,000 before you can begin to claim the deduction. If you have $5,100 in qualified medical expenses, then you could claim $100 in medical expenses. In this case, you would be better off just claiming the standard deduction.

3. Higher retirement account contributions and HSA.

The IRA (Individual Retirement Account) limits have gone up by $500 for contributors younger and older than the age 50. This means that if you’re older than 50, you can contribute up to $7,000 and if you’re younger than 50, up to $6,500. Consult with your retirement plan professional for all the details.

The HSA (Health Savings Account) limits are also increasing, but not by much. Single Taxpayers can contribute up to $3,500 and families up to $7,000. Consult with your benefits provider for all the details

4. The elimination of the alimony deduction.

This is another change that will take effect for Tax Season 2019. For divorce and separation agreements made or modified this year or after this year, alimony payments will not be deductible. This means that for a spouse who gets divorced this year and pays Alimony this year is unable to write off the payments on a tax return in 2020.

If you need help with your taxes, books, or want to create a plan to save on your taxes, consult with one of our tax professionals at Lehigh Multiservice. We also do business as H&R Block. We are highly educated and properly trained to assist you in any area of taxation. Give us a call at (610)-351-0889 to set up an appt with one of our tax professionals.