Search

How Year-End Legislation May Affect Tax Season

How Year-End Legislation May Affect Tax Season In late 2020, Congress passed the Consolidated Appropriations Act, which included many tax provisions and extenders as well as additional COVID-19 stimulus relief. For example, the ability to deduct up to $300 in charitable contributions if the taxpayer doesn’t itemize has been extended for an additional year. The business meal deduction has been increased from 50% to 100% through the end of 2022. The act also extended the repayment period through Dec. 31, 2021, for employers that opted to defer employee payroll taxes in the latter part of 2020.1 As we approach tax season, it could be beneficial to get up-to-date on provisions that may apply to your filing this year. We’re noting just a few here. We recommend you work with a qualified tax professional to understand the opportunities that may benefit you and ensure your taxes are filed accurately and on time. If you would like to learn how insurance products may help you create tax-efficient strategies moving forward, please feel free to reach out to our office. One of the tax provisions the appropriations bill made permanent was the lower medical expense deduction floor. This means taxpayers may deduct unreimbursed medical expenses that exceed 7.5% of adjusted gross income — down from 10%. However, the bill also extended some tax provisions for another two years, including the residential energy efficient property credit.2 Speaking of energy efficiency, other credits extended for one year include the qualified fuel cell rules for alternative motor vehicles, the alternative fuel refueling property credit and the credit for two-wheeled plug-in electric vehicles.3 Penalty-free distributions from qualified retirement plans for COVID-related reasons expired at the end of 2020. However, the act offers a similar option for non-coronavirus-related disasters, such as wildfires and hurricanes. If a taxpayer is affected by any type of federally declared disaster, he may withdraw up to $100,000 from a qualified plan or IRA through June 25, 2021. Similar to the COVID-related withdrawal rules, disaster-related distributions are exempt from the 10% early withdrawal penalty that normally applies but are subject to ordinary income tax treatment. Taxpayers can repay the distribution over a three-year period with no tax implications.4 Note that individual COVID relief payments paid out by the Treasury are not taxable. However, eligible taxpayers who did not receive the full amount of last year’s two distributions can claim the missing amount as a Recovery Rebate Credit when they file their 2020 taxes this year.5 Content prepared by Kara Stefan Communications. 1 Gordon Gray. American Action Forum. Dec. 22, 2020. “Major Tax Policy Changes in the Consolidated Appropriations Act.” https://www.americanactionforum.org/insight/major-tax-policy-changes-in-the-consolidated-appropriations-act/. Accessed Feb. 4, 2021. 2 Alistair M. Nevius. Journal of Accountancy. Dec. 27, 2020. “Many tax provisions appear in year-end coronavirus relief bill.” https://www.journalofaccountancy.com/news/2020/dec/tax-provisions-in-covid-19-relief-bill-ppp-and-business-meal-deductibility.html. Accessed Feb. 4, 2021. 3 KPMG. Dec. 29, 2020. “United States – President Signs COVID-19 Relief Legislation, Tax Provisions Enacted.” https://home.kpmg/xx/en/home/insights/2020/12/flash-alert-2020-514.html. Accessed Feb. 4, 2021. 4 Robert Bloink and William H. Byrnes. ThinkAdvisor. February 02, 2021. “Year-End Stimulus: What Changed for Retirement Plan Participants.” https://www.thinkadvisor.com/2021/02/02/year-end-stimulus-what-changed-for-retirement-plan-participants/. Accessed Feb. 4, 2021. 5 IRS. Jan. 12, 2021. “IRS ready for the upcoming tax season; last-minute changes to tax laws included in IRS forms and instructions.” https://www.irs.gov/newsroom/irs-ready-for-the-upcoming-tax-season-last-minute-changes-to-tax-laws-included-in-irs-forms-and-instructions. Accessed Feb. 4, 2021. We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice. The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference. 2/21-1517681B




2 views0 comments

Recent Posts

See All

What's up with GameStop?

Did you hear GameStop went viral? Here’s a quick guide to the market frenzy you’re seeing in the headlines. Long email ahead. (Buckle up, it’s a little complicated.) What is GameStop and why does ever

CONTACT US

Phone: (615) 843-5200

Fax:     (615) 526-1751

Email: info@elevatedwealth.com

OUR LOCATIONS

256 Seaboard Lane, Ste D-101

Franklin, TN 37067

Map

1606 Schaeffer Rd, Ste 100

Knoxville, TN 37932

Map

  • YouTube
  • Facebook
  • Instagram
brokercheck.png

We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives.

 

Investment advisory services offered through Brookstone Capital Management, LLC (BCM), a Registered Investment Advisor. BCM and Elevated Wealth are independent of each other. Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents.

 

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. None of the information contained on this website shall constitute an offer to sell or solicit any offer to buy a security or any insurance product.

Any references to protection benefits or steady and reliable income streams on this website refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by insurance company. Annuities are not FDIC insured.

The information and opinions contained in any of the material requested from this website are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. They are given for informational purposes only and are not a solicitation to buy or sell any of the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.