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Tax Inflation Adjustments for Filing 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.

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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.

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.

 

Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statutes, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.

 

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