News & Insights

Your 2020 Tax Schedule

Note NEW changes for Inherited IRAs & Required Minimum Distribution

Employer-Sponsored Retirement Plans

• Maximum Contribution for those under 50: $19,500 per year
• Over 50 Catch Up Provision: $6,500 per year
• Maximum Contribution for those over 50: $26,000

IRA’s

• Base Contribution for those under 50 $6,000
• Over 50 Catch Up Provision $1,000
• Maximum contribution those over 50 $7,000

NEW: Inherited IRAs

• As of January 2020, Inherited IRA’s must be fully liquidated no later than 10 years after the date of death of the original IRA owner.
• This applies to Traditional IRAs as well as Roth IRAs.  It also pulls in employer-sponsored retirement plans such as 401(k)’s, 403(b)’s Simple Plans, etc.
• Plans inherited prior to January 2020 can continue to withdraw money over the beneficiary’s lifetime.

NEW: RMD (Required Minimum Distribution)

• Acknowledging that Americans are living and working longer, the SECURE Act increases the RMD age from 70½ to 72, applicable to distributions made after Dec. 31, 2019, for individuals who reach 70½ from Jan. 1, 2020 on.  OR a simpler explanation would be if you were born on January 1, 1948, or later you can defer RMD until the year you turn 72
• Note: This does not apply to Roth IRA’s as there is no requirement to take money out of the Roth IRA

Health Savings Accounts (HSA’s)

• Single $3,550
• Married $7,100

Annual Gift Tax Exclusion

• Individual Donor $15,000 per donee

Federal Estate Net Worth Tax Exemption

• Single Tax Payer $11,580,000
• Husband & Wife $23,160,000

State Estate Net Worth Tax Exemptions

• Oregon  $1,000,000
• Washington $2,000,000
• California Zero, No Death Tax in Ca.  Go Figure

Medicare Part B Premium (Part A is paid by the taxpayer via payroll tax)
(Means Tested Based on 2018 Adjusted Gross Income (AGI) per Household)

• Single $87,000 or less, the Premium is $144.60
• Joint $174,000 or less, the Premium is $144.60 each
• Single Income between $87,000 & $109,000, the Premium is $202.40
• Joint $174,000 & $218,000, the Premium is $202.40 each

If your income in 2018 was more than the listed amounts, then your Medicare premium will go even higher.  You can see the full range on https://www.medicare.gov/your-medicare-costs/part-b-costs

Standard Deduction

• Single Taxpayers $12,400 +$1,300 for those over 65
• Married Taxpayers $24,800 + $2,600 for those over 65

Up to 85% of Social Security Income is potentially subject to ordinary taxation

Viable Tax Deductions based on your circumstances

• Max out your tax-deductible retirement savings.  For Oregon taxpayers that could mean a potential tax savings of 35% for every dollar you spend ahead to your old age
• Charitable Contributions and possibly Medical Expenses including health insurance as well as long term care insurance can help you get over the Standard Deduction
• State & Local taxes are capped at $10,000 for the year but anything below that is deductible
• Your Mortgage Interest can also help you get past the Standard Deduction

Capital Gains on the Sale of Your Home (while you are alive)

• Single, the first $250,000 is tax-free
• Married ,the first $500,000 is tax-free

(Tax Trap)

At the death of the first spouse, his or her exemption dies with them, thus the surviving spouse’s exemption will drop to $250,000.  This is bad if the house has a gain of over $250,000. When the surviving spouse passes so does the remaining exemption. Careful planning ahead is very important.

So that’s your tax schedule for 2020:

Should you have any questions, please reach out.

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From my family to yours – A Prosperous New Year!

Cheers,

 

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FACTOID!
Isn’t It Amazing that some people know the Price of Everything and the Value of Nothing.