By now anyone even in self-quarantine and not living under a rock knows that legislation has been coming out of Washington faster than toilet paper flying off grocery store shelves. Two relief packages including the CARES Act signed into law on March 27, 2020 and other tax relief and economic stimulus measures impact almost all taxpayers.
The deadline for an individual to file a 2019 federal income tax return has been extended from April 15 to July 15, 2020. Payment is also extended as is the deadline to make a 2019 contribution to an IRA. Similarly, the deadline to contribute to a Health Savings Account (HAS) has been extended. Maine has followed suit on the state’s filing deadline, but not every state has. USA Today has a resource page for many states at https://www.usatoday.com/story/money/2020/03/30/taxes-2020-when-my-state-taxes-due/2925791001/ .
Those who would otherwise be required to withdraw money and pay taxes due on those distributions from retirement plans (think IRA’s, 401(k)’s) have the year 2020 off. No Required Minimum Distributions (RMD) will be imposed on taxpayers who would otherwise be penalized by the IRS by 50% of the amount that was calculated to be the RMD for 2020. If you predict that your marginal tax rate will be going up in the future (and many experts would agree with you) it might make sense to take the distribution now, with a lower tax rate. But we usually like to hold onto those tax deferred funds for as long as we can, and pay taxes as late as possible…but every person’s situation is different, and professional advise as to yours is strongly advised.
While itemized deductions like charitable contributions don’t make sense for most taxpayers in light of the level of the standard deduction now available on the federal level, this year as much as $300 in cash donations to charity may be deducted over and above a standard deduction, per taxpayer.
And the limitations that usually apply to deductions for charitable gifts for those who are not itemizing are eased for 2020. Usually, individuals would be limited to 50% of their Adjusted Gross Income (AGI) for cash gifts to be deductible. That amount is unlimited in 2020. Similarly, corporations can now deduct charitable contributions in 2020 up to 25% (usually just 10%) of Taxable Income. This could incentivize some generosity from both individual and corporate philanthropies.