On Friday, the President signed into law the Further Consolidated Appropriations Act, 2020. In addition to preventing a government shutdown, the Act included many tax provisions that often impact clients of our Richardson, TX tax office as well as other taxpayers throughout the country. Below are some of the major changes that were signed into law with the Act.
Tax Extenders passed in the Act:
- Retroactive reinstatement for the Mortgage Insurance Premium (PMI) deduction through 2020.
- Retroactive reinstatement of the exclusion of qualified mortgage debt through 2020.
- Retroactive reinstatement for above the line qualified tuition and related expenses deduction through 2020.
- Retroactive reinstatement for the construction of energy efficient homes through 2020.
- The medical expenses deduction returns to 7.5% for 2019 and 2020 (it had moved up to 10% for 2019).
- The employer credit for paid family and medical leave and for the work opportunity credit has been reinstated for 2020.
Disaster Areas:
For individuals that suffer losses in qualified disaster areas, starting in January 1, 2018 through February 20, 2020, they will be able to take up to $100,000 from retirement plans to help pay for recovery costs without incurring the 10% penalty for early withdrawal.
Repeal of Affordable Care Act Provisions:
In addition, the Act repealed three provisions of the Affordable Care Act (Commonly referred to as Obamacare):
- The 2.3% excise tax on medical devices will be repealed starting on January 1, 2020.
- The excise tax on high cost employer sponsored health plans will be repealed starting on January 1, 2020.
- The excise tax on health insurance providers will be repealed starting on January 1, 2021. This was know as the “Health Insurance Tax”.
Retirement Plans
For Retirement Plans, starting in 2020:
- The age for required minimum distributions increases to 72.
- The Act removes the age limit for contributions to traditional IRAs.
- New parents can take penalty free distributions from a 401(k), IRS or other qualified retirement plans within a year after a birth or adoption.
Do You Need Help?
If you have questions or need help related to your tax return or any IRS problem, please call me at (972) 821-1991 or email me at [email protected].
