Page 19 - Supplement to Income Tax TY2021

Updates, Additions, and Corrections to the Text of Your Income Tax 2021

The Schedule D Tax Worksheet also must be used must have lived in a qualified disaster area and suffered
if you report 28% gains (line 18 of Schedule D) losses as a result of the disaster. A qualified disaster is a
or Unrecaptured Section 1250 gains (Line 19 of major disaster that (1) was declared by the President after
Schedule D). 2019 and no later than February 25, 2021, (2) began
The Qualified Dividends and Capital Gain after December 27, 2019, and no later than December
Tax Worksheet is shown below on page 48 of this 27, 2020, and (3) ended no later than January 26,
Supplement, and the Schedule D Tax Worksheet is on 2021. If these three tests are met, distributions of up
page 49. to $100,000 made by June 24, 2021, are considered
In the John and Keisha Taylor example (page 123; qualified disaster distributions that are exempt from the
worksheet on page 128), their total tax liability remains early distribution penalty, can be included income over
$8,272 ($450 tax on qualifying dividends and net three years and repaid within three years of receipt. The
capital gain, plus $7,822 tax on ordinary income). $100,000 limit applies per qualified disaster, regardless
However, on the 25-line Worksheet (see page 48 of of the number of plans from which distributions are
this Supplement) the $7,822 tax is on line 22 (rather received. The new law relief is similar to that provided
than line 24), the $8,272 total tax is on lines 23 and in prior disaster tax relief legislation.
25 (rather than lines 25 and 27), and the liability of Use Form 8915-E to report coronavirus-related
$9,846 that would apply in the absence of favorable distributions (see pages 209-210 and 259), as well as
capital gain rates is on line 24 (rather than line 26). the other qualified 2020 disaster distributions under
the new law. The instructions to Form 8915-E have
Definition of “real property” for like-kind exchange a table listing the non-coronavirus-related qualified
purposes (page 159). The IRS issued final regulations 2020 disasters. Form 8915-E appears on page 56 of
(T.D. 9935, 2020-52 IRB 1746) that define “real this Supplement.
property” qualifying for like-kind exchange treatment. The new law increases the maximum employer plan
In general, this includes land and improvements to loan limit (page 190) for employees living in a qualified
land, unsevered crops and other natural products of disaster area to the lesser of $100,000 (minus other
land, and water and air space superjacent to land. outstanding loans) or 100% of the account balance, for
Improvements to land include inherently permanent loans made from December 27, 2020, through June 24,
structures (e.g., buildings) and the structural 2021. For qualified employees with outstanding loans,
components of inherently permanent structures. loan repayments otherwise due during this period are
The regulations also include an incidental rule under suspended for one year.
which personal property may be treated as part of real
property qualifying for like-kind exchange treatment. Discharge of principal residence indebtedness (page
See T.D. 9935 for details. 321). The Taxpayer Certainty and Disaster Tax Relief
Act of 2020 extends the exclusion for a discharge of
Revised life expectancy tables for IRA RMDs starting in principal residence indebtedness through 2025. See the
2022 (pages 237–245, 257–258). As discussed on page new law discussion at page 4 of this Supplement.
8–10 of this Supplement, the IRS has released revised
life expectancy tables that will be used to figure RMDs, Economic impact payments and recovery rebate
starting with RMDs for 2022. credit (page 333). The new law authorized a second
round of economic impact payments of up to $600
Tax relief for qualified disaster distributions and for singles and $1,200 for joint return filers, plus
employer plan loans (pages 190, 210, 259). The $600 per qualifying child under age 17. The payments
Taxpayer Certainty and Disaster Tax Relief Act of 2020 were subject to the same phaseout as the first round
(see pages 3–5 of this Supplement) provides favorable of payments (page 333), but based solely on AGI and
rules for qualified disaster distributions made by June family status reported on 2019 returns. The second
24, 2021, from eligible retirement plans and larger loan round payments were sent out by the IRS until the
limits from employer retirement plans. The taxpayer middle of January, 2021.

Supplement to J.K. Lasser’s Your Income Tax 2021 | 17