Squeezed in just under the wire late last December, alongside the annual government spending bill, The Tax Consolidation Act of 2020 further chips away at Obama Care tax consequences, offers some new tax-savings, and includes extensions on several money-saving tax deductions.
More Obama Care Repeals
Three key tenets of the Affordable Care Act (ACA — AKA “Obama Care”) were repealed in the Tax Consolidation Act, including:
- The “Healthcare Tax” has been nixed (California, however, has replaced this “tax” with an “individual mandate” of its own, saddling CA residents with a tax penalty for failing to maintain health insurance coverage).
- Tax on “Cadillac” healthcare programs was tossed out.
- And excise tax on medical devices was axed, too.
New Tax Benefits
Retirees, part-time workers, and new parents all see new benefits under the Consolidation Act:
- Required minimum distribution withdraws from IRAs have been pushed back from age 70 1/2 to 72, and those still working can continue to contribute to their IRA until age 72.
- Part-time workers can now contribute to 401K plans and take advantage of employer fund-matching retirement programs.
- Parents can withdraw from retirement accounts to cover child-related expenses for up to a year following childbirth.
Key Tax Exemption Extensions
Several tax exemptions that have afforded taxpayers sizable tax savings in the past have been extended by the new Consolidation Act:
- Canceled debt that’s considered “qualified principal residence indebtedness” — applicable to those who defaulted on a home mortgage — which could be excluded from your income until the provision expired in 2017, has been reinstated.
- The expired “PMI” (mortgage insurance premium) deduction had been extended through at least 2020.
- The medical expenses deduction floor that jumped up to 10% has been lowered back to 7.5% for 2019 and 2020.
- The above-the-line qualified tuition and related expenses deduction — which allows you to deduct up to $4,000 of “qualified” tuition fees and related school expenses for higher education — has been reinstated and extended at least through 2020.
- The employer credit contributing toward paid family and medical leave, in addition to the work opportunity credit, have all been extended through at least 2020.
- Several environmentally-friendly tax deductions have been extended, including solar energy credits for homeowners, the biodiesel fuel usage credit, energy-efficient commercial buildings credits, and credits for wind energy generation. (Sadly, the tax credits for electric vehicles expired at the close of 2019).
- There’s also good news for those who produce and consume adult beverages, as the federal excise taxes on beer and spirits has been extended through at least 2020.
- And if you qualify for “disaster relief” (anyone who has fallen victim to a natural disaster as January 1, 2018) you’re eligible, under certain circumstances, to make tax-exempt withdraws from your retirement accounts.
Of course, these are just some of the key highlights. This recently passed legislation is chock full of potential tax implications. And always, you should consult a qualified tax professional if you any concerns.
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