2020 Tax Year

American Rescue Plan

has been passed by the Senate and the House, May 10, 2021

  • $1,400 to be paid to families earning less than $160,000
  • 2021 Federal unemployment benefits of $300 to be paid through Sept 6, 2021
  • 2020 First $10,200 of unemployment benefits are tax free for a taxpayer earning less than $150,000
  1. married filing separate might double the benefit for two 1099-Gs by getting both individuals under the $150,000 cutoff.
  2. community property states might double the benefit, but splitting one 1099-G between two parties filing married separate.
  • Back rent assistance
  • 2021 Child tax credit of $3,000 to $3,600
  • Low-interest Small Business loans
  • Enhanced paid sick and family leave
  • Enhanced Obamacare health insurance subsidies
  • No change to the federally mandated minimum wage (currently $7.25/hour)
  • Student loan forgiveness is tax-free

Form 1040 filing due date

Filing date and tax payment date for 2020 Form 1040 is May 17, 2021. The payment date for 2021 estimated taxes at this time still begins on April 15, 2021.

The due date for 2020 IRA contributions and many tax elections is May 17, 2021..

Taxpayers located in LA, OK or TX have June 15, 2021 as the due date for most all types on income tax returns and income tax payments.

Charitable donations

The first $300

Everyone gets to deduct up to $300 ($600 for married filing jointly in 2021) of verified gifts to charity "above the line" whether or not they itemize deductions. (that's line 10b on page 1 of Form 1040) You need proof, either canceled check(s) for $250 or less and/or a written acknowledgement from the charity saying that no goods or services were provided in exchange for the donation. This special provision is for tax years 2020 & 2021.

More than the first $300

If you itemize deductions, then for 2020 & 2021 up to 100% of your AGI (60% for 2022) may be donated to certain charities. Again, you need proof, either canceled check(s) for $250 or less and/or a written acknowledgement from the charity saying that no goods or services were provided in exchange for the donation.

Qualified charitable distributions (QCDs)

Up to $100,000 of charitable IRA rollovers made by a taxpayer age 70½ or older and made directly from the IRA to the charity avoids the need to pick up the distribution as income.

No, the donor cannot also claim the donation as a deduction on Schedule A of his tax return, but then since the Tax Cuts and Jobs Act increased the standard deduction many taxpayers will no longer be itemizing. This trick gives the taxpayer an upfront deduction by reducing his AGI, which generally is even better than an itemized deduction.

Taxpayers whose AGI affects their Medicare premiums may also bring down the cost of that monthly premium.

The 2020 standard deduction is $12,200 for individuals or married individuals filing separately, $18,350 for head of household, and $24,400 for married couples filing jointly.

The 2021 standard deduction is 12,550 for individuals or married individuals filing separately, $18,800 for head of household, and $25,100 for married couples filing jointly.

Non-monetary donations

generally need to be held by you for longer then one-year before making the donation.

Above $4,999 to one charity

If you make a non-monetary donation valued by appraisal of $5,000 or higher, then you need the appraiser and the charity to sign your tax Form 8283, parts IV & V.

Motor vehicles

You may claim an itemized deduction of the motor vehicle's fair market value if:

  • The taxpayer receives a timely acknowledgment from the charity.
  • That FMV is the actual sales prices of the vehicle when sold as is by the charity.
  • The charity keeps the vehicle and makes a significant intervening use of it, such as delivering meals on wheels.
  • The charity makes a material improvement to the vehicle, i.e., major repairs that significantly increase its value and not mere painting or cleaning.
  • The charity donates or sells the vehicle to a needy individual at a significantly below-market price, if the transfer furthers the charitable purpose of helping a poor person in need of a means of transportation.
  • In most cases, donated vehicles that sell for less than $500 are able to be claimed at the fair market value up to $500 without filling out any extra paperwork. See the IRS Donor's Guide.

Marketable securities

By donating securities that have appreciated for more than a year, you might actually giving the charity 20% more than if you sold the stock and then made a cash donation with the after-tax net proceeds. You do not pay capital gains tax and you receive 100% of the FMV as a charitable deduction. See Trea. Reg. 20.2031-2

Recovery Rebate Credit

The economic impact payments (EIP1 and EIP 2) were based on your 2018 or 2019 tax year information. The recovery rebate credit is figured like the economic impact payments except that the credit eligibility and the credit amount are based on your 2020 tax year information.

You may be able to claim the recovery rebate credit (on line 30 of Form 1040) only if your economic impact payments are less than the amount you are entitled to.

Virtual, crypto currency transactions

Right under entering your City & State on page 1 of Form 1040, you need to answer the question [Yes/No] if at anytime during 2020 you received, sold, exchanged or had a financial interest in Bitcoin or any similar virtual currency.