Changes to the Tax Code Became Law on 12/20/2019
Barry Weller
by Barry L Weller, EA
Congress again waited until almost the last minute to pass legislation to avert a partial government shutdown. The Further Consolidated Appropriations Act 2020 was primarily designed as a government funding bill, but like most bills, it contained various provisions not associated with its main purpose. In this case, the main purpose was funding or budget appropriations. But this act contained many tax provisions. President Trump signed this bill into law on 12/20/2019.
TAX EXTENDERS included in this law are …
• Medical expense deduction returning to 7.5% of AGI for 2019 and 2020 (it was scheduled to be 10%)
• Retroactive reinstatement of the tuition & fees deduction through 2020
• Retroactive reinstatement for the mortgage insurance premium (PMI) deduction through 2020
• Retroactive reinstatement for the exclusion from income of qualified mortgage debt through 2020
• Extension of the Work Opportunity Tax Credit for targeted demographic groups
• Extension of the New Markets Tax Credit which encourages investment in economically depressed areas
REPEAL OF THREE AFFORDABLE CARE ACT PROVISIONS in this law are …
• The 2.3% excise tax on medical devices will be repealed starting 1/1/2020
• The excise tax on high-cost employer-sponsored health plans (also know as the “Cadillac Tax”) will be repealed starting 1/1/2020
• The excise tax on health insurance providers, known as the Health Insurance Tax, will be repealed starting 1/1/2021
The Act also included a section known as the SECURE Act (Setting Every Community Up for Retirement Enhancement) which made changes to retirement plans.
• Starting in 2020, the age for required minimum distributions (RMD’s) will be 72. Also starting in 2020, there is no age limit for contributions to traditional IRA’s. NOTE: This legislation does not affect the rules for 2019. If your 70 ½ years old in 2019, you must still take an RMD and you’re not allowed to make contributions to your traditional IRA for 2019 after age 70 ½
• Starting in 2020, new parents can take penalty-free distributions from a 401(k), IRA or other qualified retirement plans within a year after a birth or adoption.
• Starting in 2020, “stretch IRA’s” have been eliminated. A stretch IRA allowed beneficiaries of IRA’s and qualified plans to withdraw all money from inherited accounts over their lifetime. The new rules state that distributions must be taken within 10 years.
Barry L Weller, EA is the president of Barry Weller & Associates with offices at 19 N Reading Ave, Boyertown, PA 19512 Phone (610) 367-8280 He is an enrolled agent, licensed to represent taxpayers before the IRS. (Revised 12/29/2019)