Clients and Friends –

Another tax season is just around the corner. We hope you are all safe and healthy.
This will be among the more interesting tax seasons of our careers. We are all getting through a tumultuous Presidential election, a worldwide pandemic, the $2.2 trillion CARES ACT and are now wading through a $900 billion COVID-19 Pandemic Relief Package. Among some of the highlights that you should be aware of:

General tax provisions:

• President Biden is proposing that tax rates for those under the top income brackets (single taxpayers with taxable income under $518,400 and married taxpayers with taxable income under $622,050) will go down, subject to Congressional approval. Tax rates for those taxpayers above $518,400-single and $622,050-married will likely be going up. The timing on these new tax rates will likely be in 2022.
• Further, President Biden is proposing an increase to the Child Tax Credit to $3,000 per child from the current $2,000 per child and add a $600 bonus credit for children under six.
• President Biden wants to significantly increase the child and dependent care credit to a maximum $8,000, nearly four times the current $2,100 maximum.
• Section 179 deductibility for the acquisition of business use property has been increased to $1,040,000 for 2020.
• Retirement plan contribution levels have increased. For people under 50, the 401(k), 403(b), 457 and SEP limit is $19,500, SIMPLE IRA limit is $13,500 and Traditional/Roth IRA limit is $6,000.
• Increased standard deduction for 2020 (24,800 for joint filers, $18,650 for heads of households, and $12,400 for single taxpayers.
• Corporate rates were reduced from 35% to 21% under President Trump. Preliminary estimates are that corporate rates will increase to 28% under President Biden.
• Alternative Minimum Taxes rates for individuals have higher thresholds for 2020. The phase-out for single taxpayers is at $518,400 and $1,036,800 for married filing joint taxpayers.

CARES Act:

• The CARES ACT provides that up to $300 in allowable charitable contributions are deductible for those taxpayers that don’t itemize deductions.
• We’re still awaiting final regulations on the PPP loan forgiveness and deductibility issues for those loans with PPP loan forgiveness.
• Keep in mind that the unemployment benefits you may have received are taxable income.
• There’s a waiver of the required minimum distributions (RMDs) for tax year 2020. You’re not required to take those distributions for 2020.
• Retirement plan contributions levels for taxpayers age 50 or older are $26,000 for 401(k), 403(b), 457 and SEP accounts, $16,500 for SIMPLE IRA, and $7,000 for Traditional/Roth IRA. For taxpayers under 50 year old, the levels are $19,500 for 401(k), 403(b), 457 and SEP accounts, $13,500 for SIMPLE IRA, and $6,000 for Traditional/Roth IRA.
• Long-term capital gain rates for single taxpayers is 0% for gains up to $40,000, 15% for gains between $40,000-$441,450 and 20% for gains in excess of $441,450. Long-term capital gains for married filing joint taxpayers is 0% for gains up to $80,000, 15% for gains between $80,001-496,600 and 20% for gains over $496,600.
• Short term capital gains will continue to be taxed at ordinary income tax rates (up to 37%).
• Capital gains tax rates for taxpayers earning more than $1,000,000 will likely be increased in 2021 or 2022.

If you have any questions, please do not hesitate to contact us.