Tax Year 2020: Take Note of Covid-19 Assistance on Your Adjusted Gross Income (AGI)
By Ann D. Blakey, CFP®
Determining your Adjusted Gross Income ("AGI") has never been more important than for tax year 2020. This is because your AGI is used as the "ceiling" against which many benefits available from recent Covid-19 assistance legislation is measured.
Specifically, the latest round of up to $1,400 per person stimulus checks is only fully available to individuals with AGI lower than $75,000 and for couples filing jointly with AGI lower than $150,000.
Also to note, The Treasury Department and Internal Revenue Service announced that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021.
Steps to Lower Your AGI
The good news is that there are several steps you can still take now -- before May 17, 2021 -- to lower your AGI for 2020:
- Make a 2020 contribution to your Traditional (deductible) IRA -- up to $6,000 per person. If you are over 50, you may contribute up to $7,000.
- If you are self-employed, contribute to your Solo 401K or SEP IRA as eligible
- Contribute to your Health Savings Account (HSA) -- up to $3,550 for an individual or $7,100 for a family. If you are over 55, you may contribute $4,550 for an individual or $8,100 for a family.
- Take advantage of the $300 deduction available if you have given at least $300 in cash to charities in 2020. Sometimes your small contributions get over-looked, but they can add up.
All of the above have certain income restrictions and other rules, so be sure to consult with your tax advisor before taking any of these steps.
Should you need to discuss these Tax Year 2020 strategies or want to check in to ensure you remain on track to achieve your goals, connect with us at 703.584.2700, firstname.lastname@example.org or schedule time with us using our online calendar.
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