This year, the filing deadline, known as Tax Day, returns to its customary April 15. Beginning Feb. 12 the IRS will begin accepting and processing returns. What other changes can older adults anticipate for filing this year?
"Planning for the nation's filing season process is a massive undertaking, and IRS teams have been working non-stop to prepare for this as well as delivering Economic Impact Payments in record time," said IRS Commissioner Chuck Rettig. "Given the pandemic, this is one of the nation's most important filing seasons ever. This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible."
Speaking of stimulus payments and tax filing: “Most people received Economic Impact Payments automatically, and anyone who received the maximum amount does not need to include any information about their payments when they file. However, those who didn't receive a payment or only received a partial payment may be eligible to claim the Recovery Rebate Credit when they file their 2020 tax return. Tax preparation software, including IRS Free File, will help taxpayers figure the amount.”
However, be sure to include information about your stimulus payment in documents you prepare for your tax professional.
The SECURE Act has changed the age when you must begin withdrawing and paying ordinary income tax on funds from your IRA. If you reached the age of 70½ in 2019, the prior rule applies and you must take your first RMD by April 1, 2020. If you reach age 70 ½ in 2020 or later, you must take your first RMD by April 1 of the year after you reach 72.
Other IRA changes:
The medical deduction remains at the 7.5% threshold for tax year 2020. It was also 7.5% for tax year 2019 after a late change by congress.
Many older adults take advantage of this deduction because of increased health care costs and preventive measures to stay healthy.
Medical care deductions include:
Prepaid medical costs can also be deducted. The IRA’s long-standing position is that the portion of the lump sum entry fee and the portion of the monthly fee attributable to medical care paid by continuing care retirement community residents is deductible as medical expenses.
“Most Kendal at Oberlin residents receive a significant tax deduction for the medical component of the monthly fee. New residents receive an even greater tax deduction for the medical component of the entry fees they pay,” said Vance DeBouter, CPA in Oberlin.
Charitable contributions are typically subject to special limitations. For example, your deduction for charitable cash contributions generally cannot be more than 60% of your adjusted gross income. For 2020, that limit under the CARES act is now 100% of your adjusted gross income.
Also new for 2020 is an above-the-line charitable deduction of $300 per tax return ($600 for couples). According to IRS Tax Tips, "taxpayers who don't itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations."
While most federal income tax laws apply equally to all taxpayers, regardless of age, there are some provisions that take into account specific situations of older taxpayers. According to IRS Publication 554, older adults enjoy the following special provisions:
Newly Updated for filing in 2021: Tax Benefits for Older Adults.
Our guide to Tax Benefits for Older Adults includes helpful tips to consider as you prepare to file your federal return for tax year 2020.
About Kendal at Oberlin: Kendal is a nonprofit life plan community serving older adults in northeast Ohio. Located about one mile from Oberlin College and Conservatory, and about a 40 minute drive from downtown Cleveland, Kendal offers a vibrant resident-led lifestyle with access to music, art and lifelong learning.