Tax Reform Provisions that Affect Individuals

Tax Reform Provisions that Affect Individuals

Standard Deduction Amount Increased

Filing status 2020 tax year
Single $12,400
Married, filing jointly $24,800
Married, filing separately $12,400
Head of household $18,650

Insurance Penalty

The penalty for not having health insurance no longer applies for 2020 federal tax returns. However, some states have their own individual health insurance mandate, requiring you to have qualifying health coverage or pay a penalty with your state tax return.

California has a new state individual health care mandate, which takes effect on January 1, 2020, and requires Californians to have qualifying health insurance coverage throughout the year, or pay a penalty based on your income and the number of people in your household

 

Economic Impact Payment Information Center: Reconciling on Your 2020 Tax Return

 

QJ1. Will I need to provide information or reconcile the Economic Impact Payment on my 2020 taxes when I file next year?  

A1. Keep the notice you received regarding your Economic Impact Payment with your 2020 tax records. These notices are mailed to each recipient’s last known address within 15 days after the Payment is made. The IRS will provide information on what actions you need to take when you file your 2020 tax return when they are available.

QJ2. Is the Payment includible in my gross income?

 

A2. No, the Payment is not includible in your gross income.  Therefore, you will not include the Payment in your taxable income on your Federal income tax return or pay income tax on your Payment. It will not reduce your refund or increase the amount you owe when you file your 2020 Federal income tax return.

A Payment also will not affect your income for purposes of determining eligibility for federal government assistance or benefit programs.

Taxation of PPP loan forgiveness

The CARES Act provides that the debt discharge of a PPP loan is excluded from the gross income of the business for federal income tax purposes.

No Tax Deduction for Expenses Paid with Forgiven PPP Funds
IRS has confirmed their position that business expenses paid with Paycheck Protection Program (PPP) funds that are forgiven cannot be deducted for federal tax purposes.

Qualifying Children Claimed

Qualifying Children Claimed

If filing Zero One Two Three
Single, Head of Household, or Widowed $15,820 $41,756 $47,440 $50,954
Married Filing Jointly $21,710 $47,646 $53,330 $56,844

Investment Income Limit
Investment income must be $3,650 or less for the year.

Maximum Credit Amounts
The maximum amount of credit for Tax Year 2020 is:

  • $6,660 with three or more qualifying children
  • $5,920 with two qualifying children
  • $3,584 with one qualifying child

$538 with no qualifying children.

FTB – Personal Health Care Mandate

Beginning January 1, 2020, California residents must either:

  • Have qualifying health insurance coverage
  • Obtain an exemption from the requirement to have coverage
  • Pay a penalty when they file their state tax return

You will begin reporting your health care coverage on your 2020 tax return, which you will file in the spring of 2021.

Make sure you have health care coverage

To avoid a penalty, you will need minimum essential coverage (MEC) for each month beginning on January 1, 2020 for:

  • Yourself
  • Your spouse or domestic partner
  • Your dependents

Many people already have qualifying health insurance coverage through:

  • Employer-sponsored plans
  • Coverage purchased through Covered California or directly from insurers
  • Medicare