Taxes 2020: Here are the tax changes to expect this year
Last year ushered in sweeping changes to the U.S. tax landscape with more than 600 new rules enacted by the Tax Cuts and Jobs Act of 2017.
Still gone this year are exemptions along with deductions for moving costs, job search expenses, and tax prep fees. And how much you can write off for state and local taxes is still limited to $10,000 for the 2019 tax year.
Read more: Tax planning 101: The full breakdown
“This is year two of tax reform, so now people are getting heads wrapped around what has changed,” Kathy Pickering, chief tax officer at H&R Block, told Yahoo Money.
All that said, there are some changes you should know about when you file your 2019 tax returns. Here’s what they are.
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Tax Cuts and Jobs Act
There still are a pair of changes for the 2019 tax year from the new tax law.
The first has to do with divorce. If you receive spousal support, you no longer need to claim that as income. But if the alimony is coming out of your pocket, you can’t deduct that amount on your taxes like you previously could.
The new tax law also eliminated the health coverage penalty starting in 2019. So, if you didn’t have health insurance last year, you no longer have to pay that tax penalty.
While the standard deduction doubled last year under the new tax law, it increased again for the 2019 tax year to account for inflation. It’s now $12,200 for single taxpayers; $24,400 for married couples filing jointly; and $18,350 for heads of household.
Some old tax benefits are back. In December, Congress extended four temporary tax provisions:
Forgiveness of mortgage debt: Debt forgiven by your lender is usually considered taxable income. But this extender gets rid of any taxes a homeowner might be on the hook for when a portion of their outstanding mortgage balance is cancelled, such as a short sale or foreclosure.
Private mortgage insurance deduction: Homeowners can now deduct premiums for private mortgage insurance and insurance on mortgages backed by the Federal Housing Administration or Veterans Affairs.
Energy efficiency credit: This is a credit worth up to $500 that a homeowner can claim when they make certain energy-efficient upgrades to their house.
Tuition and fees deduction: If you, your spouse, or your child is in college, you can deduct up to $4,000 a year in tuition costs and expenses. This is an above-the-line deduction, so you don’t need to itemize your taxes to take it.
As an added bonus, all these extensions retroactively apply to both the 2019 and 2018 tax years. That means you may want to consider amending last year’s returns if you could benefit from one or more of these extenders.
Cryptocurrency and taxes
The IRS added a new question to the Schedule 1 form about your dealings with cryptocurrency. It asks: “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?”
The agency wants to get a better handle on crypto transactions and is using the responses to help craft future tax guidance, said Wendy Walker, solutions principal at Sovos, a software provider of tax solutions to businesses.
“The IRS is late to the game here, but they are definitely paying attention this year,” she told Yahoo Money.
If you have any gains or losses from crypto transactions, make sure to report them, even though it can be complicated to figure out. In most cases, you won’t receive a 1099 that records these transactions. Instead, you need to rely on your own records to accurately show when you bought and sold the crypto and for how much.
“If it’s a voluntary disclosure and you’re making your best effort to include the transactions, the IRS will be more lenient,” if you make a mistake in reporting, Walker said.
Filing your taxes
It should be easier to file your taxes for free this year. The major tax software companies can no longer hide their free-file service from a Google search, according to new rules from the IRS. About 70% of taxpayers could qualify for free file.
If you’re unhappy with your taxes this year — maybe your tax refund was too small or you ended up owing the government — you should adjust your paycheck withholdings to avoid a similar outcome next year.
But you’ll find a new W-4 withholding form. You may need your most recent paystubs and this year’s taxes to fill it out correctly.
Janna is an editor for Yahoo Money and Cashay. Follow her on Twitter @JannaHerron.
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