By Denise Felber, CPA, Tax Partner
We don’t know the outcome of the Senate race or the changes resulting from the new leadership in the White House, but we do know:
- What is expiring this year
- What is new this year
- What only applies to this year
Expiring This Year
Among the 31 provisions, the following expirations may affect you:
- Indian depreciable lives and credits
- Tuition deductions
- Energy credits for new homes and nonbusiness property additions
- Deduction for energy-efficient buildings
Do you have the equipment you planned to add in 2021? Can you accelerate into 2020? Have you been billed for the spring semester?
New This Year
- Age is not a limitation for funding IRAs
- Required minimum distributions will begin at 72, not 70 ½
- Rules are different for retirement plans inherited from those dying after 2019
- Except for spouses, minor children and disabled beneficiaries, the balance must be distributed by the end of 10th year following the date of death
- Partnership, partners, and S Corporation owners have new requirements in reporting tax basis information on returns. Extra work will be required before filing
Do you have earned income? Do you plan to fund an IRA this year due April 15, 2021? Did you inherit a retirement plan?
- Flow‐through entities operating in Oklahoma and a few other states
- Can report and pay income taxes instead of owners
- Income reported by owner decreases; owners do not report tax payments
- Avoid the $10,000 itemized tax
Do you own a pass‐through entity? What is the state(s) of operation?
Only This Year
- Cash contributions to public charities are limited to 100% of income
- If not itemizing, up to $300 of contributions can be added to standard deductions
- Recovery rebate checks are not taxable and do not have to be returned
- Retirement plan distributions up to $100,000 are taxable but not subject to penalty
- The distribution can be reported over 3 years and even repaid with a refund of taxes
- PPP loan forgiveness is reported in the year forgiven, not when the proceeds are received
- Currently, expenses paid with forgiven PPP loan proceeds are not deductible
- Employer portion of FICA taxes paid from March 27 to December 31 can be delayed up to two years
Did you obtain a PPP loan? Has it been forgiven? Did you delay paying the payroll taxes?
Rumors for 2021-Who Knows What Will Happen
After 2020 events, anticipating 2021 is very speculative. From comments made during the campaign,
- The estate tax exemption could drop dramatically. Do you have an estate over $3,500,000?
- Income tax and FICA tax rates could increase for those with income over $400,000. Do we need to project the cost?
- Capital gains could be taxed at 39.6% for individuals with total income over $1,000,000. Is there an asset sale in your near future?
- Corporate rates may increase to 28%. Would an S Corporation election be advisable for 2021?
- AFR rates are extremely low (.15%). Would family loans be a consideration?
- Capital gain distributions are made in December. Check your brokerage statement for unexpected income
- For those itemizing, make contribution payments or noncash donations before year end
- Assemble tax records early. Unexpected tax bills are not welcome
This information could be expanded by several pages. This provides the highlights and some of the questions that may apply to your tax situation. We still have several weeks before year‐end. May we contact you?