On December 27, President Trump signed the “Consolidated Appropriations Act of 2021” which keeps the federal government running through the end of September 2021, but also includes $900 billion of coronavirus relief.
In an article for Kiplinger, Certified Financial Planner™ and Accredited Wealth Management Adviser Evan Beach explains how the new law impacts older Americans. Highlights:
- Stimulus Check. Certain taxpayers (married couples who file jointly and have adjusted gross incomes of $150,000 or less and singles with AGIs of $75,000 or less) will receive a direct payment of $600;
- Charitable Giving. Those who file jointly, and take the standard deduction, in 2021 can take up to a $300 deduction per taxpayer, meaning $600 per couple, for charitable contributions. In 2020, the deduction was $300 per tax return, not per person, so married couples were limited to a $300 deduction;
- Medical Expense Deductions. The tax deduction for medical expenses was made permanent and pegged at 7.5 percent. Here’s how it works. John was sick in 2020. He had gross income of $100,000 and medical expenses of $10,000. With a 7.5 percent hurdle, he can write off his medical expenses in excess of $7,500 on his Schedule A. He gets to write off $2,500; and
- Required minimum distributions are back. The SECURE Act, which implemented important retirement reforms and took effect on January 1, 2020, increased the minimum age that people must start taking distributions from their retirement accounts from 70½ to 72, for those born on or after July 1, 1949. The CARES Act suspended 2020 RMDs, but the new law did not extend the suspension into 2021. The IRS imposes an especially hefty penalty of 50 percent for missed distributions, says Beach, so it’s important that you confirm when you must begin taking distributions and how much you have to take.