Tax Changes and Key Amounts for the 2020 Tax Year
We were expecting 2020 to be a quiet year in terms of tax law changes. But, boy, were we ever wrong! The government funding bills signed by President Trump in December 2019 included a lot of tax provisions. The economic stimulus packages enacted in March 2020 to help boost the U.S. economy dragged down by the coronavirus added more. Plus, there are several other 2020 tweaks from new rules or annual inflation adjustments. All in all, this means American taxpayers are staring at a long list of tax changes for the 2020 tax year.
If the past is any indication, the IRS should start accepting 2020 returns in late January or maybe early February. But now’s the time to start getting ready for tax filing season. And getting familiar with all the new tax laws for 2020 should be part of that process. To help you out, we pulled together a list of the most important tax law changes and adjustments for 2020 (some related items are grouped together). Use this information now so you can save money when it comes time to file your 2020 return.
Recovery Rebate Credits
Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, most Americans received a stimulus check in 2020 for $1,200 ($2,400 for couples filing jointly), plus $500 more for each child under age 17. The payments were phased out for joint filers with adjusted gross incomes above $150,000, head-of-household filers with AGIs above $112,500, and single filers with AGIs above $75,000. (To see how much you should have received, use our Stimulus Check Calculator.)
Technically, your stimulus check was an advance payment of a special 2020 tax credit known as the recovery rebate credit. When you file your 2020 return, you’ll have to reconcile the stimulus check you received with the recovery rebate credit you’re entitled to claim. For most people, the stimulus check payment will equal the tax credit allowed. In that case, your credit will be reduced to zero. However, if your stimulus check was less than your credit amount, the tax you owe will be reduced by the difference (and you might even receive a refund). And if your stimulus check was more than your credit amount, you generally won’t have to repay the difference to the IRS. (Also note that the stimulus check payments are not taxable!)