2020 taxes, your TSP, mortgage and health premiums

Because of the 2017 tax law, many were surprised to learn that it no longer paid to itemize deductions that had been important in the past.

While some people are already working on their 2020 taxes there are probably many more still trying to figure out what they did right, or wrong, because of the 2017 tax law. Many were surprised to learn that it no longer paid to itemize deductions that had been important in the past.

The Tax Cuts & Jobs Act of 2017 limited deductions for state and local taxes to a maximum of $10,000 per return. It also eliminated the ability to claim a miscellaneous itemized deduction and it placed limits on the ability to deduct interest on a home mortgage or a home equity loan. It also increased the standard deduction to $24,000 for married couples and to $12,000 for single individuals.

So are there things individual federal workers can do to minimize their federal tax liability? The short answer is yes, which is where my knowledge ends. What do I know about the new tax law, or for that matter the old one it replaced? Again, the short answer is almost nothing. And how much do I know about deductions and limits? Another short answer: Almost nothing.

Which is why a very nice lady in Brentwood, Tennessee, does my taxes and has for years. Fortunately, I know someone much closer who is an expert on estate planning and tax law. Tom O’Rourke will be my guest today, 10 a.m. EDT, on our Your Turn radio show. If you have questions send them to mcausey@federalnewsnetwork.com before showtime. Here’s a preview of some of the things Tom will be talking about on today’s show:

“As a result of these changes in the tax law there any steps an individual federal employee can take to minimize his or her tax bill. Before taking advantage of any tax saving opportunities it is always necessary to consider whether the opportunity make sense and remember that the ultimate tax shelter is to simply not make any money. You need to make sure that the suggestions below make sense for you.

“There are a number of benefits that are part of the federal benefits package that an employee may take advantage of that can produce significant income tax savings. These include:

  • The Thrift Savings Plan — Should you invest in the traditional TSP or the Roth TSP?
  • Pay your health insurance premiums on a pre-tax basis. This is the way federal employees pay their health care premiums if they are enrolled in the Federal Employees Health Benefits Program.
  • By enrolling in a Heath Savings Account you can reduce you tax by up to $7,000 per year, or $3,500 if you are single. You first need to make sure that a HSA meets your needs.
  • Contribute to the federal flexible spending account (FSA) to pay out-of-pocket health care costs and dependent care expenses. This can reduce your taxable income by as much as $7,700; or $2,700 for health and $5,000 for dependent care expenses. An FSA only makes sense if you plan to use the money you will set aside.

“In addition, if you have available funds you may wish to consider investing in either a Roth or traditional IRA. This could reduce your taxable income by as much as $7,000; or $6.000 if you are under 50 years old, if you are eligible to deduct the contribution. If you are not eligible to deduct a contribution to a traditional IRA you may invest in a Roth IRA to produce a tax free nest egg for use on retirement. to a traditional.”

The good news, Tom says, is that “All of these opportunities are available even if a taxpayer does not itemized deductions.” If you can’t listen live at www.federanewsradio.com or on 1500 AM in the Washington, D.C. area the show will be archived online. Hope it helps!

Nearly Useless Factoid

By Amelia Brust

Although they can certainly cry, newborns can’t produce visible tears because their tearducts aren’t fully developed for at least the first three to four weeks. They produce just enough to coat and protect the eyes as part of a fight-or-flight response to temporary stress caused by extreme emotions. Tears also release stress-inducing hormones for a sense of relief afterward.

Source: Livescience

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