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Looking Ahead to Next Year – IRS Helps Taxpayers See “2020”

Jim Brandenburg

Nov 14 2019

3 min read

On November 6, 2019 the IRS issued inflation-adjusted amounts for various tax items that will apply for the 2020 year

On November 6, 2019 the IRS issued inflation-adjusted amounts for various tax items that will apply for the 2020 year. The tax law dictates which items are to be adjusted for inflation and how this adjustment is to be made; these amounts are released this time of year by the IRS in advance of the new year.

The IRS released Rev Proc 2019-44 for general tax items (over 60 items) and Notice 2019-59 for retirement plan contribution limitations.

Here is a listing of selected tax amounts for 2020:

The standard deduction for a married couple filing jointly will increase from $24,400 for 2019 to $24,800 for tax year 2020. For single taxpayers and married individuals filing separately, the standard deduction will increase to $12,400 a hike of $200 from 2019.
Tax Rates: For the 2020 year, the top marginal tax rate remains at 37%. This top rate applies to married couples filing jointly with taxable income above $622,050, and for a single taxpayer with taxable income over $518,400.
The other individual tax rates for 2020 are as follows:

Tax Rate

35%

32%

24%

22%

12%

Applies to Taxable Income Over (Single Filers)

$207,350

$163,300

$85,525

$40,125

$9,875

Applies to Taxable Income Over (Married Filing Joint)

$414,700

$326,600

$171,050

$80,250

$19,750

The AMT (Alternative Minimum Tax) exemption for a married couple filing jointly will rise to $113,400 in 2020 (up from $111,700 in 2019), and the point at which the AMT exemption begins phasing out will be $1,036,800 (up from $1,020,600 in 2019).
The foreign earned income exclusion will move up to $107,600 for 2020 (up from $105,900).
The annual gift tax exclusion for 2020 will remain at $15,000. This represents no change from 2019. This is the annual amount a donor can give to each done in a year.
For individuals dying in 2020 (on or after January 1, 2020), the estate tax exclusion rises to $11,580,000. This was increased from $11,400,000 for the 2019 year.
The annual contribution limit for employees participating in a Section 401(k) plan (as well as for a Section 403(b) plan and most Section 457 plans) is increased to $19,500 for 2020; up from $19,000 in 2019.
In addition, the “catch-up” contributions for those age 50 and over who participate in these Section 401(k), 403(b), or 457 plans is increased to $6,500. This is $500 higher than the $6,000 “catch-up” limit for 2019.
Next, the annual contribution limitation in 2020 to an IRA remains at $6,000. This is unchanged from 2019. The additional catch-up contribution limit for an IRA for individuals aged 50 and over stays at $1,000.
The income phase-out range for individuals making contributions to a Roth IRA will be $196,000 to $206,000 for 2020 (for a married couple filing jointly); which is up from $193,000 to $203,000 for 2019. The income phase-out range for single taxpayers and heads of household rises to $124,000 to $139,000 (from $122,000 to $137,000 in 2019).

Again, the above tax amounts are selected changes for the 2020 year. Check out the IRS resources linked above for other inflation-adjusted amounts for next year. Please contact your Sikich tax advisor if you have any questions.

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About the Author

Jim Brandenburg

Jim Brandenburg, CPA, MST, is a director with extensive experience and knowledge in corporate and partnership tax law, mergers and acquisitions, and tax legislation. His expertise includes working with owners of closely held businesses to identify tax planning opportunities and assist them in implementing these strategies.