There are few things more certain for Washington residents than the yearly need to report income and settle any tax bills with the IRS. It is also common for slight changes in tax codes to affect the process each tax season. Taxpayers will likely notice several significant changes when they prepare to file their returns.
Americans are often willing to give to the neediest among them. And the Cares Act provides more incentive for taxpayers to act on their charitable urges. In past years, deductions for charitable contributions were only available to taxpayers who itemized deductions. Taxpayers can also deduct as much as $300 from their income tax responsibility in 2020 when they file using the standard deduction.
Increased standard deductions
The overwhelming majority of Americans take the standard deduction when preparing tax filings. The 2020 increases for standard tax deductions include:
- A $200 increase to $12,400 for taxpayers filing as single individuals
- A $400 increase to $24,800 for married taxpayers filing jointly
- A $200 increase to $12,400 for married taxpayers filing separately
- A $300 increase to $18,650 for taxpayers filing as head of a household
Limit increase for health savings account
Health issues were at the forefront of many American minds in 2020. A health savings account allows taxpayers to contribute untaxed money toward potential medical needs now. The taxpayer can also avoid taxes when using this money to pay for medical care later. Taxpayers are eligible for HSA accounts if the health insurance they maintain includes a “high-deductible.” Limit increases for HSA accounts become relevant for both individual and family insurance plans for 2020 tax purposes.
Payments and accrued interest paused for people owing money on federal student loans in 2020. The Cares Act also allows employers to pay $5,250 toward worker student loan debt for the year. Workers and their employers are exempt from paying taxes on this money.
Income tax regulations include a complex set of laws in a constant state of change. Individuals with questions regarding their current year’s income tax obligations may benefit from a conversation with an attorney.