What's New for 2020 Tax Filing Season
By: Tax Hotline
Winter 2020 (Vol. 37, No. 4)
FORM 1040: REVISED AND REDESIGNED. The IRS released a draft Form 1040 for 2019 tax returns that has been updated from the 2018 version. Of significance is that there are now three schedules instead of the six that appeared in the 2018 Form 1040. Schedule 6 is now part of Form 1040. Schedules 2 and 4 have been combined into a single schedule as have Schedules 3 and 5. Schedule 1 remains as is. Another notable change is that the signature line is once again, at the end of the form. While the new Form 1040 for 2019 is no longer “postcard size,” it is still shorter than it was in 2018.
FORM 1040SR: U.S. TAX RETURN FOR SENIORS. The new Form 1040SR for 2019, was created in response to the Bipartisan Budget Act of 2018 and is intended for taxpayers age 65 and older. While similar to the standard Form 1040, the font size is larger, and it includes a chart of the standard deduction and additional standard deduction amounts for taxpayers over 65 years old or blind. Taxpayers with more complicated tax situations should use the regular Form 1040.
OTHER NEW TAX FORMS FOR 2019
- Forms 8995 and 8995-A: Qualified Business Income Deduction Simplified Computation
- Form 8985: Pass-Through Statement [Pass-Through Statement — Transmittal/Partnership Adjustment Tracking Report]
- Forms 965-C, 965-D, and 965-E: Inclusion of Deferred Foreign Income Upon Transition to Participation Exemption System
- Form 8978: Partner’s Additional Reporting Year Tax
- Form 8997: Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments
REMINDER OF IMPORTANT TAX CHANGES
HEALTH INSURANCE MANDATE PENALTY ELIMINATED. For 2019 tax returns there is no box on Form 1040 to check off indicating you had health insurance. However, some states have their own individual health insurance mandate requiring coverage.
ALIMONY IS NO LONGER DEDUCTIBLE. Starting January 1, 2019, alimony is no longer deductible to the payer and is no longer taxable to the payee for separation or divorce agreements or decrees in effect on this date or later.
MEDICAL EXPENSE DEDUCTION THRESHOLD REMAINS AT 7.5%. Deduction for Qualified Tuition and Related Expenses was extended.
TAX BREAKS FOR TAXPAYERS WHO ITEMIZE
DEDUCTING STATE AND LOCAL INCOME, SALES AND PROPERTY TAXES. The deduction that taxpayers can claim for state and local income, sales and property taxes is limited to a combined, total deduction of $10,000 - $5,000 if married filing separately.
REFINANCING A HOME. The deduction for mortgage interest is limited to interest paid on a loan secured by the taxpayer’s main home or second home. Homeowners who choose to refinance must use the loan to buy, build, or substantially improve their main home or second home, and the mortgage interest they may deduct is subject to the limits described under “buying a home,” below.
BUYING A HOME. People who bought a new home in 2019 can only deduct mortgage interest paid on a total of $750,000 ($375,000 married filing separately) in qualifying debt for a first and second home. For existing mortgages, if the loan originated on or before December 15, 2017, taxpayers may continue to deduct interest on a total of $1 million in qualifying debt secured by first and second homes.
CHARITABLE DONATIONS. Donations to a qualified charity also qualify as a tax break. Taxpayers must itemize deductions to deduct charitable contributions and must have proof of all donations. The non-profit organization must be a 501(c)(3) public charity or private foundation and non-cash donations may require a qualified appraisal.
DEDUCTING MILEAGE FOR CHARITY. Miles driven using a personal vehicle for charitable service activities could qualify you for a tax break. Itemizers can deduct 14 cents per mile for charitable mileage driven in 2019.
REPORTING GAMBLING WINNINGS AND CLAIMING GAMBLING LOSSES. Taxpayers who itemize can deduct gambling losses up to the amount of gambling winnings. You may deduct gambling losses; however, the amount of losses you deduct can’t be more than the amount of gambling income you report on your return.
INVESTMENT INTEREST EXPENSES. Investment interest expense is interest paid or accrued on a loan or part of a loan that is allocated to property held for taxable investments - the interest on a loan you took out to buy stock in a brokerage account, for example. Taxable investments include interest, dividends, annuities or royalties.