As of this writing, there are only three days left in 2020, and this week contains New Year’s Eve and New Year’s Day.
Guessing you heard that Congress just passed another major COVID-19 Relief Bill?
It’s over 5,000 pages long … and we must confess, we haven’t read it all yet.
It will take time (and patience) to break it all down but just rest assured that we are digging through this thing to find EVERY SINGLE BENEFIT that might apply to our valued clients such as you.
There seems to be plenty of good news for regular families in this new relief bill.
The quick summary:
- Additional $600 stimulus payments to individuals, and $600 per child (similar income limitations as before).
- They have not announced when the new stimulus payments will go out but we are expecting within the next 14 days for most clients.
- Spouses and children of ITIN holders will qualify for this stimulus payment (last time, any family members of ITIN holders were excluded from getting the stimulus payment)
- $284 billion in more PPP funding (small business forgivable loans)
- $300 in federal unemployment supplement, plus extension of earlier unemployment programs that expanded eligibility (e.g. freelancers and self-employed eligible for unemployment)
- Extension of the special charitable contribution provisions enacted for 2020 through 2021
- Extensions, in some cases permanently, of many tax breaks that had been scheduled to expire on 12/31/2020
- More enhancements to the Child Tax Credit and the Earned Income Tax Credit for lower and middle income families
- COVID-19-related expenses now qualify as “above-the-line” educator expense deductions
We’ll have more information for you about all these new tax laws soon, for now just wanted to give you a quick summary.
In the meantime, let’s take the quick opportunity in our last Note of 2020 (!) to recap your possible year-end tax moves…
Pronto Income Tax Team’s Very Last Minute Tax Moves for 2020
“We didn’t lose the game; we just ran out of time.” -Vince Lombardi
Because time is short, and some moves do require more than this week to pull off, we’re restricting myself to those tax moves which you can realistically handle before the end of the year (Thursday).
This will be short, and (hopefully) sweet to your wallet…
1) Use Your FSA Funds
Money set aside in a flexible spending account must be spent by the end of the year, else the funds are lost. Some employers allow a 2-and-a-half month grace period. So check with your employer to see what your personal deadline is for utilizing your FSA savings.
2) Make an Extra Payment on Your Mortgage
If you own a house with a mortgage, and you can swing the cashflow hit, add an additional payment before year-end, and the interest on that payment will be deductible for 2020. Of course, that means that it WON’T be so for 2021, but perhaps you can use this as an “extra” payment … and get ahead of the escrow game.
3) Make the Switch to a Roth IRA
Roth conversions are taxed in the year the conversion happens. However, Los Angeles taxpayers have the option to undo part or all of that conversion by their filing deadline. In order to retroactively undo part of their conversion next year, they first have to convert this year. So if you are on the fence about converting, consider taking the plunge before the end of the year, knowing that you (and/or WE) can re-characterize some or all of the amounts early next year.
You know how I feel about charitable giving by now (I hope). This week, of course, is a big one for non-profits who are the happy beneficiaries of our last-minute donations. And with the $300 deduction available even for those who take the “standard deduction”, your money goes even farther. Please, if you can, give.
You can pay early on a monthly gift, or give a lump-sum gift. The purpose (aside from the many, many benefits to the organization, and to you, of course), being to knock more income into a different tax bracket perhaps, or to simply cut your tax bill, regardless of the bracket status.
Now, there are plenty of others. But these are the quickest, and the easiest tax moves (aside, perhaps, from the Roth conversion — but that can be done quickly).
- Max out personal gifts — if you have means, you can give up to $15K tax free to a family member or friend.
- Max out workplace retirement accounts (if you have one).
- Evaluate (quickly) what your income might look like in 2021, and try to accelerate or decelerate any kind of income (that you can control) accordingly.
Hope this helps!
More (much more, especially about the relief bill) in the future … in 2021.
Pronto Income Tax Team