2020 has been filled with an array of economic twists and turns. Thanks to (LMLDF CFO), Mrs. Joette Claude, the CEO of C.E.B. Accounting and Tax Services, who is a tax expert, for sharing very important tax law changes that could save you money.
TIME IS TICKING….
Do not be distracted by the holidays. December 31 is upon us; the clock is ticking, and if you are going to take advantage of last-minute opportunities to reduce your 2020 tax bill, you need to do it now! The following are a few opportunities that you can only take for the year 2020.
1. Give generously
For the year 2020, you can deduct 100% of your adjusted gross income for cash donations to public charities. Cash donations to your donor-advised fund do not qualify. An alternative to giving cash to your favorite charity is giving away appreciated stock instead.
2. Consider a Roth IRA conversion
The CARES Act, which Congress passed in response to the coronavirus pandemic, suspended the required minimum distributions (RMDs) for 2020. Therefore, if you do not need your current retirement income to meet your living needs, you may consider a Roth conversion instead of your 2020 RMDs.
3. Get your tax withholding in order
If your employer is delaying the withholding of social security taxes from your paycheck, you may be looking at owing taxes due to insufficient tax payments. To combat the penalty and interest for underestimated tax payments, you can make an estimated payment by January 15, 2021, and still write off the amount on your 2020 return.
4. Stock up on savings
Consider moving a few extra dollars into your health savings account if you have the extra cash available. Health savings accounts have three key tax advantages: (1) money you contribute is either pretax or tax-deductible, (2) it accumulates free of taxes, and (3) you can use your funds for qualified medical expenses and avoid taxes when you withdraw them. April 15, 2021 is your deadline to contribute. The maximum an individual can contribute to an HSA is $3,550, $7,100 for family plans. Individuals age 55 and over can put in an extra $1,000.
5. Don’t forget home base business deductions
Ordinary and necessary business expenses are deductible. Here’s a shortlist:
- home-office deduction
- write-offs for mileage
- costs for the materials and equipment you bought for your job.
Keep your receipts and faithfully track your income and expenses. Even maintaining a simple spreadsheet with these details can help streamline your tax return preparation next spring.
To receive a FREE tax plan analysis for 2020, call and make an appointment today at 757-934-3725.