Alan Huberman | July 13, 2020
A bit of a game changer is headed the way of taxpayers for tax year 2020. The IRS has announced a series of tax inflation adjustments, encompassing 60 provisions, for 2020 tax returns that will be filed in the year 2021.
The wide-sweeping adjustments that are likely to be of greatest interest to taxpayers include the following:
- The standard deduction for married couples filing jointly will rise to $24,800 for tax year 2020, up $400 from 2019. Single taxpayers and married individuals filing separately will see the standard reduction rise to $12,400 in 2020, up $200 from 2019. The standard deduction for heads of households will be $18,650, up $300 from the previous year.
- The personal exemption for tax year 2020 will remain at zero.
- The top tax rate will remain 37% for individuals (single taxpayers) with incomes greater than $518,400 and $622,050 for married couples filing jointly. The lowest tax rate of 10% is reserved for single individuals with income of $9,875 or less or $19,750 for married couples filing jointly.
- For 2020, as in 2019 and 2018, there will be no limitation on itemized deductions; that limitation was eliminated by the Tax Cuts and Jobs Act of 2017.
- The Alternative Minimum Tax exemption amount for tax year 2020 will be $72,900 and begins to phase out at $518,400 for single tax filers; a $113,400 AMT exemption for married couples filing jointly begins phase out at $1,036,800.
- The tax year 2020 maximum Earned Income Credit amount will be $6,660 for qualifying taxpayers with three or more qualifying children.
- The monthly limitation for the Qualified Transportation Fringe Benefit in tax year 2020 will be $270.
- The dollar limitation for employee salary reductions for contributions to health flexible spending arrangements will be $2,750 in tax year 2020.
There are additional provisions that will impact taxpayers and we have only touched on those that will affect a majority of taxpayers. For a full listing and explanation of all tax inflation adjustments for tax year 2020 as well as complete tax tables, please click here.
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