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Financial Education 101



TAX FILING TIPS FOR A YEAR UNLIKE ANY OTHER.

Before we can officially leave 2020 behind, we have to file our 2020 tax returns. The coronavirus pandemic affected many of our financial lives, causing the federal government to create some changes this tax filing season. Some good news? You have more time to file. The federal and state of Pennsylvania filing deadline has been extended to May 17, 2021.

Check out these tips for what to expect if you have yet to file your 2020 tax return:


What counts as income 

The pandemic created record levels of unemployment in 2020. Unemployment benefits would typically qualify as taxable income, but the American Rescue Plan passed in March made the first $10,200 of unemployment benefits tax free (as long as your household income is less than $150,000) on your federal return. Any benefits in excess of that amount will need to be claimed on your return. The economic stimulus payment you may have received is not taxable income.

More room for deductions 

The federal CARES Act passed a provision allowing you to deduct up to 100% of your adjusted gross income in qualified charitable donations if you itemize your deductions. Even if you take the standard deduction, the CARES Act allows you to write off up to $300 in charitable contributions that were made in cash. You can also deduct any medical expenses above 7.5% of your adjusted gross income if you choose to itemize your deductions.

For the entrepreneurs 

If you started or grew a side hustle to make some cash in 2020, don’t forget that counts as taxable income. However, you should also itemize your deductions to claim travel expenses and other expenses toward your 
new business.

Retirement plans 

The CARES Act waived the required minimum distribution requirement for all retirement plans in 2020. Be sure to do your research before filing your 2020 taxes, and don’t be afraid to reach out to a professional for advice. If you’ve never selected a tax preparer before, 2020 may be a smart year to invest in this service.

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