2020 IRS Inflation Adjustments

3rd Quarter 2019: Drought

September 30, 2019

Where Are Your Documents?

November 6, 2019

November 1, 2019

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Income Tax Planning

In November 2019, the IRS released Revenue Procedure 2019-44 (PDF) and Notice 2019-59 (PDF), which detail the tax changes and inflation adjustments for 2020.

Once again, we’ve summarized a few which we feel will have the broadest impact:

STANDARD DEDUCTION
	2019	2020	Change
Married Filing Jointly¹	$24,400	$24,800	$400
Single² and Married Filing Separately¹	$12,200	$12,400	$200
Head of Household²	$18,350	$18,650	$300

¹A married filer who is blind or over age 65 can claim an additional $1,300. Two married filers who are both over age 65 or blind can claim $2,600, unchanged from 2019.
²Single or head of household filers who are blind or over age 65 can claim an additional $1,650 standard deduction, up $50 from 2019.

ESTATE & GIFT TAX
	2019	2020	Change
Annual Exclusion Gifts	$15,000	$15,000	No Change
Estate and Gift Tax Basic Exclusion	$11,400,000	$11,580,000	$180,000
Generation Skipping Exemption	$11,400,000	$11,580,000	$180,000

CONTRIBUTION LIMITS¹
	2019	2020	Change
Traditional and Roth IRA	$6,000	$6,000	No change
IRA Catch-up Limit²	$1,000	$1,000	No change
Elective Deferral Plans^2,3	$19,000	$19,500	$500
Elective Deferral Plan Catch-up Limit²	$6,000	$6,500	$500

¹ Check with your advisor for the limits applicable to SEP, SIMPLE, and defined contribution plans.
² Catch-up contributions are available for anyone over age 50
³ Elective deferral plans include 401(k) plans, 403(b) plans, most 457 plans, and Thrift Savings plans

AGI PHASE-OUTS
Roth IRA Contribution	2019	2020	Change
Single/Head of Household	$122,000-$137,000	$124,000-$139,000	$2,000
Married Filing Joint	$193,000-$203,000	$196,000-$206,000	$3,000

AGI PHASE-OUTS
Deductible IRA Contribution	2019	2020	Change
Single/Head of Household	$64,000-$74,000	$65,000-$75,000	$1,000
Married Filing Separate	$0-$10,000	$0-$10,000	No change
Married Filing Joint (active spouse)	$103,000-$123,000	$104,000-$124,000	$1,000
Married Filing Joint (non-active spouse)	$193,000-$203,000	$196,000-$206,000	$3,000

OTHER ADJUSTMENTS
	2019	2020	Change
Long Term Capital Gains Rate brackets (married filing jointly)	0% – up to $78,750 15% – up to $488,850 20% – $488,851 and above	0% – up to $80,000 15% – up to $496,600 20% – $496,601 and above	0% – $1,250 15% – $7,750
Unearned Income Subject to Kiddie Tax	Above $1,100	Above $1,100	No change
Health/Medical Savings Account contribution limit	$3,500 (self only) $7,000 (family)	$3,550 (self only) $7,100 (family)	$50 (self only) $100 (family)
Cafeteria plans (Flexible Spending Account) maximum contributions	$2,700	$2,750	$50
Adoption Credit for Qualified Expenses (phased out based on MAGI)	$14,080	$14,300	$220
Foreign Earned Income Exclusion	$105,900	$107,600	$1,700
Lifetime Learning Credit Joint Filer MAGI Threshold	$116,000	$118,000	$2,000
Limitation on Itemized Deductions	None	None	No Change
Qualified Business Income (Section 199A) Deduction Threshold	$315,000 married filing joint	$326,600 married filing joint	$11,600

INCOME TAX BRACKETS
MARRIED FILING JOINTLY and SURVIVING SPOUSES
	2020	2020 Tax is This Amount Plus this Percentage	Of the Amount Over
10%	Income up to $19,750	$0 plus 10%	$0
12%	$19,751 to $80,250	$1,975 plus 12%	$19,750
22%	$80,251 to $171,050	$9,235 plus 22%	$80,250
24%	$171,051 to $326,600	$29,211 plus 24%	$171,050
32%	$326,601 to $414,700	$66,543 plus 32%	$326,600
35%	$414,701 to $622,050	$94,735 plus 35%	$414,700
37%	Income over $622,051	$167,307.50 plus 37%	$622,050

INCOME TAX BRACKETS
SINGLE TAXPAYERS
	2020	2020 Tax is This Amount Plus this Percentage	Of the Amount Over
10%	Income up to $9,875	$0 plus 10%	$0
12%	$9,876 to $40,125	$987.50 plus 12%	$9,875
22%	$40,126 to $85,525	$4,617.50 plus 22%	$40,125
24%	$85,526 to $163,300	$14,605.50 plus 24%	$85,525
32%	$163,301 to $207,350	$33,271.50 plus 32%	$163,300
35%	$207,351 to $518,400	$47,367.50 plus 35%	$207,350
37%	Income over $518,401	$156,235 plus 37%	$518,400

There are many other cost-of-living adjustments for 2020 which may impact you. Review the Revenue Procedure 2019-44 and Notice 2019-59 and consult your CPA to see if there are others you need to be aware of for your specific situation.

This information is believed to be accurate but should not be used as specific investment or tax advice. You should always consult your tax professional or other advisors before acting on the ideas presented here.