Tax changes for filing in 2020, by Steve Ciaccio

by Steve Ciaccio, MBA, CPA, CF P ®

It’s here again. It’s time to file our tax returns. Here are some changes for filing your 2019 tax return (to be filed in 2020). The news is relatively good.

While many people thought that the rules that took effect in 2018 made the tax return more confusing, the good news is that taxes were lower for a large number of taxpayers. Those tax savings will mostly continue with our 2019 tax returns. Also, the 2019 tax returns seem to be simpler than the 2018 returns.

Form 1040 has been redesigned to make it easier to work with. There are now three schedules instead of the six schedules that were on the 2018 tax returns. Some of the schedules have been combined. Overall, they seem easier to work with. For senior citizens who are 65 years old or older with relatively simple tax situations, there is a new form that they can use instead of form 1040. The simplified form is called 1040-SR. The font is larger and additional information provided directly on the form by the IRS makes it less necessary to refer to the instructions. Senior citizens with more complex tax situations should consider using the regular Form 1040. Overall, it seems that the 2019 tax returns are simpler and easier to use.

Those who owned a business in 2018 likely thought that the calculation for the Qualified Business Income Deduction was quite complex. You might be happy to know that there is a simplified computation for that deduction on the 2019 tax return.

Another simplification is that the penalty for failing to maintain health insurance coverage expired at the end of 2018. The calculation for that penalty was difficult in past years and for those who did not have full year coverage, significant time will be saved. Bear in mind that some states continue with their own health care insurance requirements, although Illinois does not have such a requirement.

Alimony is no longer deductible for the payer and no longer taxable to the payee for separation or divorce agreements or decrees that take effect on January 1, 2019 or later. Those agreements that were in effect prior to January 1, 2019 are not affected by the change.

The medical deduction threshold remains at 7.5% of adjusted Gross Income. For many, the higher standard deductions that came into effect in 2018 make it less likely that they will benefit from itemizing their deductions. However, for some, the 7.5% medical deduction threshold might make itemizing more beneficial.

The deduction for Qualified Tuition and Related Expenses has not been restored as of this writing. However, the possibility of it being restored remains. If you had such expenses in 2019, the American Opportunity Tax Credit or the Lifetime Learning Credit might be more beneficial. Each of these have limitations and not everyone qualifies for them. You should determine which you qualify for and which might be most beneficial for you.

There are many other changes as well. Check with a Certified Public Accountant to determine how to best utilize the new rules for your specific situation.

Overall, it seems that the IRS is trying to make tax returns easier. Their effort is welcome! All the best!

Steve Ciaccio, MBA, CPA, CFP® is the founder of Ciaccio Accounting located at 232 S. Batavia Ave., Batavia. He can be reached at 630-240-6826, Steve.Ciaccio@ CiaccioAccounting.com. The information opinions voiced in this article are for general information only and are not intended to provide specific tax advice or recommendations for any individual or business. © Copyright Steve Ciaccio 2020