With a new year comes a new tax filing season! Hopefully this tax season will not begin with an IRS shutdown, like last year. There were a few tax changes made in the recent bill passed by Congress, as well as a new W-4 Form. As usual, if any of the information below will apply to you, or if you have questions, please reach out to us at MRA Tax Services!
The new W-4 Form will be in effect as of 1/1/20. There is no need to file a new form with your current employer unless you want to change your withholdings. The new form does not ask how many exemptions but has different sections for situations that affect the calculation of withholdings.
There were several common tax deductions or credits that were removed in the 2017 tax law. The new bill extends many expired tax provisions. Among those extended through 2020 are:
- Sec. 108(a)(1)(E), which excludes from gross income the discharge of qualified principal residence indebtedness income;
- The Sec. 163(h)(3) treatment of mortgage insurance premiums as qualified residence interest, which permits a taxpayer whose income is below certain thresholds to deduct the cost of premiums on mortgage insurance purchased in connection with acquisition indebtedness on the taxpayer’s principal residence;
- The 7.5% (instead of 10%) adjusted-gross-income floor for medical expense deductions in Sec. 213(f); and
- Sec. 222, which provides an above-the-line deduction for qualified tuition and related expenses.
The bill also incorporates the text of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, which passed the House of Representatives in May but was never voted on by the Senate.
The bill is designed to encourage retirement savings in various ways and to simplify administrative requirements in order to make it easier for employers to offer retirement plans.
The IRS also issued final regulations (T.D. 9889) providing guidance on tax-favored investments in qualified opportunity zones (QOZs). These regulations provide additional guidance for taxpayers eligible to elect to temporarily defer the inclusion in gross income of certain gains if corresponding amounts are invested in certain equity interests in qualified opportunity funds (QOFs), as well as guidance on the ability of such taxpayers to exclude from gross income additional gain recognized after holding those equity interests for at least 10 years. In addition, they address various requirements that must be met for an entity to qualify as a QOF, including requirements that must be met for an entity to qualify as a qualified opportunity zone business (QOZB).
Alison Cogan is a CPA and Director of Tax Services at MRA Advisory Group. You can reach Alison at email@example.com