Other Topics from the Fall 2020 Newsletter

2020 Mileage Rates

Standard rate for business driving decreases to 57.5¢ per mile, medical rate decreases to 17¢ per mile, charitable rate remains at 14¢ per mile, and mileage rate for moving decreases to 17¢ and is only allowed for active military relocating per military orders.

Form 1099

Real estate operators that claim their real estate operations as a trade or business to receive the 20% federal tax deduction for trade or business income should prepare Form 1099 for subcontractors. Contact Kakenmaster & Associates if you have any questions regarding Form 1099.

Form 1040 Changes

Based on a draft released from the IRS, the Form 1040 will include two additional lines. The first is above-the-line deduction for charitable contributions of $300 or less by non-itemizers. The second line allows filers who qualified for stimulus payments to reconcile the amount they received against the recovery rebate credit that they are otherwise entitled. In addition, the question regarding virtual currency transactions has been moved from Schedule 1 on last year's 1040 to page 1 of the 2020 return.

Incentive Stock Options

Incentive stock options (ISOs) are often offered as a company benefit, and if managed correctly can be profitable. ISOs allow the employee to buy company stock shares at a predetermined price (the exercise price) for a set period, regardless of the current market price. One of the benefits of ISOs is to have the increase in value treated as capital gains rather than as ordinary income.  However, to receive this tax treatment the ISOs have to meet two holding period tests. First the final sales date must be at least two years from the grant date (the date you are given the right to purchase the shares). The second holding period test is that the final sales date has to be at least one year from the exercise date.