Familiarizing yourself with the latest tax laws can make the filing process a lot easier. Aside from knowing what to expect, you’ll be able to strategize ways to save so you can get your maximum refund. Here’s what you need to know to be fully prepared for the 2020 tax season.
The standard deduction rates are higher than last year
One of the easiest ways to save on your taxes is to claim the standard deduction. Unlike when you itemize, you don’t have to gather receipts or do any complicated calculations. You just deduct a set amount from your taxable income based on your filing status. Taxpayers will be happy to learn that you’ll be able to save a little more the next time you file because the standard deduction rates have risen.
Expect higher income tax brackets
Income tax brackets are used to calculate your tax liability, but that’s not something you have to worry about when you do your taxes with ezTaxReturn. Simply enter the information as it appears on your tax documents and the program will handle all the math.
It’s going to take a lot more to claim the medical expense deduction
Taxpayers can deduct a portion of their medical and dental expenses if they itemize their return. The expenses must be related to the diagnosis, cure, treatment or prevention of your disease. Deductible expenses include birth control, eyeglasses, therapy and more. Last year, you were allowed to deduct any amount that was greater than 7.5% of your adjusted gross income. Unfortunately, the threshold has gone up to 10%.
You can save more money in an IRA
Chances are you already have big plans for your refund, but we have a suggestion that will pay off in the long run, park your cash in an IRA. With a Roth IRA, your money will grow tax-free and your distributions in retirement will also be tax-free. For 2019, the maximum you can contribute to a Roth or traditional IRA is $6,000. Those ages 50 or older can contribute $7,000. The best part is you have until April 15, 2020 to max out the account for 2019.
The EITC is worth up to $6,557
Every year, millions of workers receive a financial boost thanks to the Earned Income Tax Credit (EITC). It is worth up to $6,557 which is an increase from tax year 2018. To claim the credit, your earned income and adjusted gross income must be less than $55,952. The threshold may be lower depending on your filing status and the number of children you have. Taxpayers without children can still qualify but their credit amount will be much lower. Let ezTaxReturn help you claim every credit you deserve. Pre-register now to do your taxes the fast and easy way in 2020.
Having dependents can lower your tax bill
Taxpayers claiming a dependent under 17 years old may qualify for the Child Tax Credit. The maximum credit is $2,000 per child and up to $1,400 is refundable. If you’re caring for an older dependent such as an aging parent, you may be eligible for the Credit for Other Dependents (ODC). Although the credit is nonrefundable, it can lower your tax bill by $500 per dependent. You can only claim the ODC, if you don’t receive the Child Tax Credit. Don’t forget that if you pay someone to watch your dependents while you go to work, you may also be able to claim the Child and Dependent Care Credit.
There are plenty of money-saving tax breaks available
The IRS offers numerous credits and deductions which can lower your tax bill and potentially boost your refund. Here are some worth noting:
- Mortgage Interest Deduction – If you itemize, you can deduct the interest on a loan used to buy, build or improve your home. The cap varies depending on when you bought your home.
- American Opportunity Credit – Worth up to $2,500 per student during their first 4 years of college. Forty percent of the credit is refundable.
- Lifetime Learning Credit – The maximum amount is $2,000 per return. Students don’t have to pursue a degree to claim the credit.
- Student Loan Interest Deduction – You can deduct up to $2,500 of interest paid on a qualified student loan.
- Educator Expense Deduction – Educators can deduct up to $250 of unreimbursed classroom expenses.
ezTaxReturn’s step-by-step guidance makes it easy to claim every tax break you deserve. So, you get the biggest possible refund, guaranteed.
No more penalties for not having health insurance
In the past, you were penalized for not having what was considered minimum essential coverage. However, the rule was changed by the Tax Cuts and Jobs Act. The IRS will no longer punish you for being uninsured.
Reporting alimony is a thing of the past
Not all marriages end in happily ever after, sometimes you get divorced and have to pay alimony. If the divorce agreement was made or modified after December 31, 2018, the alimony doesn’t have to be reported on your tax return. It’s no longer considered taxable income for the recipient nor is it deductible by the payer.
New standard mileage rates
According to AAA, it costs an average of $9,282 per year to own a vehicle which is fairly expensive. The good news is that you may be able to recoup some of the costs on your tax return. Those who are self-employed can deduct 58 cents per mile driven for business. Everyone else must itemize in order to take advantage of the deduction and can only do so in certain situations. The standard mileage rate is 20 cents per mile driven for medical care and 14 cents per mile driven for charity work.
Qualifying taxpayers file FREE at ezTaxReturn.com
You can save even more money when you do your taxes with ezTaxReturn.com in 2020. Qualifying taxpayers can file a federal return for FREE. Visit www.ezTaxReturn.com – the fastest, easiest and most affordable way to do your taxes – for qualification requirements.
Tax Day is April 15, 2020
Millions of people wait until the last minute to do their taxes. No matter when you start, you must be finished by April 15th. If you owe the IRS and miss the tax deadline, you’ll accumulate penalties and interest on your unpaid debt.