Inflation Adjustments for Tax Year 2020
The IRS has recently published the tax inflation adjustments for tax year 2020. The newly adjusted rates effect everyone’s tax liability for the new year. The standard deduction increased from $24,400 to $24,800 (married filing jointly) and $12,200 to $12,400 (filing individually). The personal exemption for 2020 will remain at 0 and, as in 2019, there is no limitation on itemized deductions. The IRS has listed the following new 2020 tax rates:
Marginal Rates: For tax year 2020, the top tax rate remains 37% for individual single taxpayers with incomes greater than $518,400 ($622,050 for married couples filing jointly). The other rates are:
35%, for incomes over $207,350 ($414,700 for married couples filing jointly);
32% for incomes over $163,300 ($326,600 for married couples filing jointly);
24% for incomes over $85,525 ($171,050 for married couples filing jointly);
22% for incomes over $40,125 ($80,250 for married couples filing jointly);
12% for incomes over $9,875 ($19,750 for married couples filing jointly);
10% for income of $9,875 or less ($19,750 for married couples filing jointly).
Some of the other adjustments include:
Earned Income Credit amount increasing from $6,557 in 2019 to $6,660 in 2020.
Estate tax exclusion has increased from $11,400,000 in 2019 to $11,580,000 in 2020.
The dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is up $50 dollars from 2019 to $2,750 in 2020.
For more on 2020 inflation adjustments, visit https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2020.