The extended July 15 deadline for filing your 2019 federal income tax return is behind us. Now it's time to think about your current federal tax situation.
Tax planning is especially complicated for 2020. There are a lot of moving pieces: The COVID-19 pandemic has caused some people to lose their jobs or take pay cuts. Many investors have suffered financial losses during the crisis — while other people have prospered by taking advantage of COVID-related business and investment opportunities. So, depending on your situation, you may have less (or possibly more) taxable income in 2020 than you did in 2019.
In addition, certain provisions in the Coronavirus Aid, Relief and Economic Security (CARES) Act may create opportunities for some taxpayers to save taxes or tap into alternative sources of cash (like retirement funds). Plus, it's a presidential election year — and a change in leadership could lead to changes in tax rates and other provisions for 2021 and beyond. Any change could possibly even be retroactive for 2020.
With all that in mind, individuals should consider the following tax planning moves midway through the year to lower their tax obligations for 2020.