New Tax Laws in 2020

You may still receive a Form 1099- MISC if your income is derived from rents, royalties, fishing boat proceeds, health care payments, payments in lieu of dividends or interest, crop insurance proceeds or gross proceeds paid to an attorney.

As you begin planning to file your 2020 tax return, here are some of the new tax laws passed over the last year that could affect you.

1.Early distribution penalty waived.

The 10% early distribution penalty on up to $100,000 of retirement withdrawals for coronavirus-related reasons is waived during 2020. New reles allow tax liabilities on these distributions to be paid over a three-year period.

2.Required minimum distributions waived for 2020.

Required minimum distributions in the year 2020 for various retirement plans is suspended. The corresponding 50% penalty asso ciated with not taking a distribution is also suspended in 2020.

3. Medical deduction threshold decreases.

Qualified medical expenses that exceed 7.5% of your adjusted gross income may be used as an itemized deduction. The lower threshold (for­ merely 10%) is a carryover from a late, 2019 tax law change.

4. Mortgage forgiveness is not income.

If a bank forgives mortgage indebtedness, it is typically income to you. Qualified principal residence indebt­edness that is forgiven, however, may be excluded from income with the reactivation of this tax law.

5.Mortgage insurance premium deductions.

if your mortgage bank requires insurance on your loan and the loan qualifies, you can deduct this premium as na itemized deduction.

6.The tuituion and fees deduction is available.

The above-the-line deduction for up to $4,000 in qualified tuition and fees expenses that expired is still available in 2020. You will need to evaluate this tax break versus others like the American Opportunity Credit and the Lifetime Learning Credit.

Other new tax laws for 2020:

  • Part-time workers can participate in 401(k) plans.
  • Leftover money in a 529 education plan can be used to pay off $10,000 of student loans.
  • New parents can withdraw $5,000 out of retirement funds without penalty to pay for the cost of a birth or adoption.