2020 Year-End Planning for Individuals – Itemized Deductions

By Douglas McAlpine, Esq., CPA

A breakdown of itemized deductions for year-end 2020:

• Standard Deduction: The basic standard deduction has been increased to $12,400 for Individuals, $24,800 for Married Filing Jointly and $18,650 for Head of household. This has been one of the most impactful changes for the individual taxpayer as it significantly impacts how one should evaluate the ramifications of state and local taxes, charitable donations, home loans and unreimbursed business expenses.

• Medical Expense Deductions: The threshold for medical expense deductions is 7.5% for 2020 but will increase in 2021 to 10% of Adjusted Gross Income for all taxpayers.

• Taxes Paid Deduction: There is an overall limit of $10,000 for the combined total of property taxes and state and local income taxes per year.

• Mortgage Interest: Mortgages that originated after 2017 will have their interest deduction limited to interest on debt up to $750,000 ($375,000 for married taxpayers filing separately). Interest expense arising from a Home Equity line of credit (HELOC) will only be considered deductible if the funds are used for home improvements.

• Charitable Contributions: The limit for cash charitable contributions to public charities has increased to 60% of a taxpayer’s adjusted gross income. However, under the Cares Act, that limit is increased for 2020 only to 100% for qualified cash contributions. The increased limit is not available for contributions to Donor Advised Funds.

• Miscellaneous Deductions Subject to 2%: Are disallowed as a result of the Tax Cuts and Jobs Act.

For more information regarding year-end tax planning, please contact us at 404-255-7400 or info@hoffmanestateaw.com.