3 Tax Extenders May Help You Save Big Money in 2020
by Susannah McQuitty
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It’s time to start thinking about taxes again, and compared to the huge tax reform buzz that hit last year, you may be a bit fuzzy on what’s going on in 2020. Is tax reform still rolling out? Has anything been changed? Do you even need to care?
In December, congress agreed on a bill to extend certain tax deductions that were being phased out. Translation: Some tax breaks that were on their way out are here to stay for at least another year.
Some of the extended tax deductions are relevant to many taxpayers. Here are three that might benefit you when you file your 2019 tax return:
The mortgage insurance premium (or PMI) deduction
Good news for homeowners! If you itemize deductions instead of taking the standard deduction, you could qualify for a tax deduction on your mortgage insurance premiums. This deduction should look familiar from past years—you may have used it when filing your 2017 tax return.
When you file, be sure to keep your mortgage interest amount and your mortgage insurance premium amount separate, since those are two separate deductions.
The medical expenses deduction floor
Here’s one that’s directly related to recent tax reform. Before the Tax Cuts and Jobs Act (TCJA), you could only deduct medical expenses that were greater than 10% of your adjusted gross income (AGI). The TCJA lowered that floor to 7.5%, but only for 2017 and 2018—at least, that is, until the recent extenders bill. Now, the 7.5% floor has been extended through 2019 and 2020, so you can deduct more medical expenses.
The qualified tuition and fees deduction
Our last highlighted tax deduction extender is for you students or parents of students. The TCJA eliminated the qualified tuition and related expenses deduction, but the deduction has made a comeback for your 2019 tax return. Even better, this deduction is considered “above-the-line,” which means you won’t have to itemize to claim it.
Close, but no cigar
So, what about some other popular deductions that didn’t make the cut? Sadly, you still can’t deduct unreimbursed job expenses on your Schedule A—so make sure to keep receipts to be reimbursed by your employer. Also, state and local taxes (SALT) deductible on Schedule A are still sitting at the $10,000 cap.
Remember that the mortgage insurance premium deduction and the medical expense deduction can only be claimed if you choose to itemize deductions instead of taking the standard deduction. If you file with 1040.com, we’ll calculate whether it would be better for you to take the standard deduction or to itemize—and we do all that in the background. All you have to do is follow our walkthrough of your return, and we’ll catch all the tax breaks you qualify for. It’s really that simple.
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