2020 Taxes

[Folster]

So while doing taxes, the wife and I discovered an important detail about the stimulus/relief checks.

The first two were awarded in 2020 but based off your 2019 income. They were essentially tax credits and if your income for 2020 was higher than 2019 to the point that you entered the phase out ranges, you will have to pay back a portion or all of the stimulus amounts in 2020.

This will also be relevant in 2021 for the 3rd stimulus.

Life is probably okay for most people in the phase out ranges unless you live in a really high cost of living area. But it's something to be aware of if you got relief checks based on 2019 AGI and you expect your 2020/2021 AGI exceeds 75K for individual or 150K for joint filers.

 

[Russ Smith]

Didn't want to start a 2021 taxes thread unless others want. Did Biden not make ANY changes to taxes yet? I guess not?

I increased my witholding just had extra held out of each check and I owe less than the last 2 years but the primary reason why is I had a decent size stock loss that offset most of my gains. i still earned too much to write any off with an IRA contribution so I have to pay. I guess I hadn't paid attention to that part of Biden's first year but we're basically still on Trumps' taxes right?

 

[Folster]

Didn't want to start a 2021 taxes thread unless others want. Did Biden not make ANY changes to taxes yet? I guess not?

I increased my witholding just had extra held out of each check and I owe less than the last 2 years but the primary reason why is I had a decent size stock loss that offset most of my gains. i still earned too much to write any off with an IRA contribution so I have to pay. I guess I hadn't paid attention to that part of Biden's first year but we're basically still on Trumps' taxes right?

I think most of the proposed tax changes were in Biden's BBB plan that failed to get enough support.

We ar expecting to owe due to the child tax credits. We typically breakeven on Federal or close to it, but since the credits were paid out, we'll likely have to return that most of that money.

 

[Beaver]

We had a very generous return this year due to the increased limit in childcare deductions. Thanks Biden!

 

[Cheesebeef]

Didn't want to start a 2021 taxes thread unless others want. Did Biden not make ANY changes to taxes yet? I guess not?

I increased my witholding just had extra held out of each check and I owe less than the last 2 years but the primary reason why is I had a decent size stock loss that offset most of my gains. i still earned too much to write any off with an IRA contribution so I have to pay. I guess I hadn't paid attention to that part of Biden's first year but we're basically still on Trumps' taxes right?

Sinema singlehandedly killed any changes to the tax code.

 

[Russ Smith]

I think most of the proposed tax changes were in Biden's BBB plan that failed to get enough support.

We ar expecting to owe due to the child tax credits. We typically breakeven on Federal or close to it, but since the credits were paid out, we'll likely have to return that most of that money.

RIght now my Fed looks like about 840 bucks, haven't checked state yet. It was over 1400 until my stock loss went in.

So even with me holding back more money I would have gotten hit again. I will probably increase my 401K again to lower my taxable income.

Another example of why they need to adjust rules for where you live. Apparently 76K is the cutoff for being able to reduce taxes with IRA contribution, for people in states like California that's just not high enough. I don't make a big salary at all for where I live but I made too much to get an IRA contribution discount.

 

[Folster]

RIght now my Fed looks like about 840 bucks, haven't checked state yet. It was over 1400 until my stock loss went in.

So even with me holding back more money I would have gotten hit again. I will probably increase my 401K again to lower my taxable income.

Another example of why they need to adjust rules for where you live. Apparently 76K is the cutoff for being able to reduce taxes with IRA contribution, for people in states like California that's just not high enough. I don't make a big salary at all for where I live but I made too much to get an IRA contribution discount.

Do you have an HSA? If so you can make a prior year, deductible contribution up until the tax filing deadline.

 

[Russ Smith]

Do you have an HSA? If so you can make a prior year, deductible contribution up until the tax filing deadline.

No I don't do HSA, I should several here have pointed that out I just don't. You can do the same with the IRA btw you can make 21 contributions in 22, but you can't reduce your taxes doing it over a certain amount of income.

Don't know if HSA has a cutoff.

 

[Devilmaycare]

RIght now my Fed looks like about 840 bucks, haven't checked state yet. It was over 1400 until my stock loss went in.

So even with me holding back more money I would have gotten hit again. I will probably increase my 401K again to lower my taxable income.

Another example of why they need to adjust rules for where you live. Apparently 76K is the cutoff for being able to reduce taxes with IRA contribution, for people in states like California that's just not high enough. I don't make a big salary at all for where I live but I made too much to get an IRA contribution discount.

I hate that 76k cut off for IRAs. I really wish they'd rework those rules. I'd like to be able to be able to put a little bit more away per year right now to catch up a little from me being a slacker in my 20s on it.

It's also not just about putting away more money. I've also wanted to be able to do it because the investment options in my old 401k sucked. With it I had wanted to just put in up to the employer match and then IRA the rest to get better fund options. Fortunately the one at my new job is much better. We can pick from almost all of Vanguard's funds in it.

 

[Folster]

No I don't do HSA, I should several here have pointed that out I just don't. You can do the same with the IRA btw you can make 21 contributions in 22, but you can't reduce your taxes doing it over a certain amount of income.

Don't know if HSA has a cutoff.

The IRA deductible contribution is typically not an option for someone who is covered by an employer plan due to the income limits.

 

[Russ Smith]

The IRA deductible contribution is typically not an option for someone who is covered by an employer plan due to the income limits.

I guess that does make sense.

 

[Folster]

I guess that does make sense.

The IRS doesn't want people above a certain income level to double dip on deferring income taxes with a 401K and an IRA. But you are right, it's highly biased against high COL areas.

The wife and I really like the HSA for those last minute prior year contributions to tweak our tax returns. It's a really underrated investing and retirement vehicle.

 

[Devilmaycare]

The IRS doesn't want people above a certain income level to double dip on deferring income taxes with a 401K and an IRA. But you are right, it's highly biased against high COL areas.

The wife and I really like the HSA for those last minute prior year contributions to tweak our tax returns. It's a really underrated investing and retirement vehicle.

Yeah, I'm annoyed that my new job doesn't have an HSA option. I rarely get sick so they work great for me. When we get closer to summer I'm going to ask HR if we can get it as an option next year. It really seems crazy for a company where the majority of the employees are in their 20s or 30s not to have one.