Hey! It’s that time of year again. You probably see a lot of H&R Block or Turbotax ads lately.  Taxes season is here. I already updated the post on how to file taxes with 1099-Form if you do food delivery as an independent contractor. But I was out of the country for all of 2019. I recently came back. I had to brush up on what’s going on with the tax code for 2020. If you drive for a food delivery company like Postmates and Caviar or do rideshare for Lyft and Uber as an independent contractor, it’s essential to stay informed on changes to the tax code. There are changes to the tax code for 2020 you should be aware of, especially if you file your taxes with the 1099-Form.

Okay, stop. Before you go on reading, I want to remind you; taxes are complicated. I am not a tax expert. I kindly request that you don’t e-mail me asking for help with complicated tax issues after reading this post. Please consult a tax expert or someone licensed to deal with other people’s taxes. You’ll save yourself time. And you’ll spare me a potential lawsuit (lol). Thanks.

Okay, continue. Here are 10 changes to the 2020 taxes code affecting independent contractors and self-employed individuals:

1. Taxes Deadline Extended 90 Days To July 15

This is not really in the taxes code, but a change nonetheless. This deadline extension is the most recent update. We usually file our federal taxes return April 15 every year. But this year, because of the Coronavirus Pandemic, the federal government has extended the deadline to July 15. That is a 90-day extension.

2. Increase In Income Limits For Tax Brackets

We still have the same number of taxes bracket (seven). The Tax Cuts and Jobs Act in 2017 changed the tax brackets’ income limits a bit. Here’s a chart:

3.Increase In The Standard Deduction

In 2018, the Standard Deduction almost doubled! It was $6,350 in 2017 for Single Filers. But in 2019, it was $12,200. Here’s a chart:

For independent contractors or self-employed individuals filing with 1099 Form, it used to make more sense to itemize deductions because expenses could be more than $6,350. But now more 1099-Form workers are picking the Standard Deduction. Keep this mind as you track your mileage and expenses while doing food delivery with your car,

4. Increase In The Alternative Minimum Tax (AMT) Exemptions

The AMT makes sure people can’t escape paying their fair share of taxes through various loopholes. How it works is a little complicated. Depending on your income, this change could affect you.

Here is a chart for this year’s AMT:

5. Changes To The Medical Expense Taxes Deduction

You can deduct medical expenses if they qualify. The condition is, your medical expenses have to surpass 10% of your adjusted gross income for you to take advantage of this deduction. The Tax Cuts and Jobs Acts lowered this percentage to 7.5%. This decrease made it easier to take advantage of this deduction. But this only applied to 2017 and 2018.

In 2020, that percentage is 10%. In other words, your medical expenses have to be more than 10% of your adjusted gross income for you to deduct your qualified medical expenses.

6. No More Individual Health Insurance Mandate

While we’re on the topic of healthcare, here’s another related change: no more individual mandate for health insurance. Under the Affordable Care Act (aka Obamacare), there was a federal penalty to be paid if you don’t have health insurance. The Tax Cuts and Jobs Acts got rid of this federal penalty in 2019.

Your state’s tax codes might have a penalty for not having insurance, however. You can avoid state-level penalties if you have an exemption. There are states in the U.S. that will penalize you for not having health insurance. They are Massachusetts and New Jersey. If you live in the nation’s capital, Washington, D.C., you will have to pay this penalty for not having health insurance. Check your state’s tax code to see you qualify for an exemption if you do food delivery or rideshare in these areas.

7. No More Alimony Taxes Deduction

 If you got a divorce in 2019 and have alimony payments, they are not tax-deductible.  If you receive alimony payment for a divorce after the end of 2019, you don’t have to report these payments on your taxes.

8. Alternative Vehicle Tax Credits Phasing Out

To get more people buying electric vehicles and plug-in hybrids, the government gave tax credits for purchasing these cars. But as sales increases, these tax credits will go away. If a car manufacturer sells 200,000 vehicles, the credit starts to decrease until you don’t get them anymore.  Tesla and General Motor’s electric cars have begun to phase out already. In 2020, buying a Tesla will get you street credits, not tax credits.

To see which car models still are eligible for this tax credit, visit the government’s site.

9. New Limits for Retirement Contribution

If you invest for retirement, the 2019 maximum 401K contribution limit is $19,000. Up from $18,000 from 2018. IRA contribution limit is $6,000 for people under 50 and $7,000 for people over 50. You can deduct these retirement contributions from your taxable income and pay less in taxes.

Note: Important, the deadline is April 15  for making contributions for the previous tax year.

10. New Limits for Health Saving Contributions

Health savings account contributions are tax-deductible. And like the retirement contributions (see #9), the limits for health saving accounts have gone up. For self-only coverage: $3,500. For family coverage: $7,000