Business man sitting at a computer thinking about 2020 taxes

Thinking About Taxes? Things to Consider in 2020

At the moment, tax rates are at historic lows. We have record deficits and are looking to add more. Where do you think tax rates will be at in 1 year? 3 years? 5 years or more? Here are a few things to consider when thinking about taxes in 2020.

While everyone’s situation is different, we believe this is a serious consideration in tax planning for many individuals.

Is this a good time to convert funds from a traditional IRA to a Roth IRA?

Most IRA fund balances are at a low point and many taxpayers may see lower income in 2020. This may be a good time to convert some or all your funds to a Roth IRA.

You can manage the tax brackets. For example, an estimate of income can be prepared to find out how much more income you can have to stay in the same tax bracket. This way you can effectively manage your tax burden.

What do you need to know about Roth IRA contributions?

If your modified adjusted gross income in 2020 for married filing jointly is $196,000 or less you can contribute directly to a Roth IRA. Income at $206,000 cannot make a Roth contribution.

Our income exceeds the Roth limits, what can be done?

You can contribute to a traditional IRA. You can then convert to a Roth IRA. There are other limitations so be sure to discuss this with your financial adviser or make an appointment with us to discuss how this works and if a conversion will help you in retirement.

For 2020 there’s a new charitable deduction available

The IRS has a $300 cash (not non-cash such as a Goodwill donation) charitable deduction for 2020 which can be used whether you itemize or not.

Required Minimum Distributions

If you have not begun taking required minimum distributions (RMD’s) in 2020 you can wait until age 72 to start. The previous rules were at age 70 ½. Note that if you have already started your RMD’s you cannot skip them until age 72-you are bound by the previous rules.

There is a COVID-19 law that allows all taxpayers to waive their 2020 Required Minimum Distributions

There are other considerations for this so it is best to consult your financial adviser.

If you have questions, please talk to the experts at David Mills, CPA, LLC, today. We would be happy to help! Contact us today.