IRS Issues Tax Inflation Adjustments; The Internal Revenue Service (IRS) provides the tax year 2020 annual inflation adjustments including the tax rate; schedules as well as other tax changes in the United States, applicable for 60 plus tax provisions. To view the complete details and information regarding the annual adjustments in tax inflation for the next year 2020 in USA, please check Revenue Procedure 2019-44 (PDF). The important thing to note here is that those tax returns that will be filed in 2021 are valid for the tax year 2020 tax inflation adjustments.

The Taxpayer First Act of 2019 is responsible to add the tax law change which covers in the PDF attachment of revenue procedure, above in the description. The tax law change in the revenue procedure resulted in the enhancement of the failure to file penalty to $330 for returns due after the end of the tax year 2019. Beginning with tax year 2021, the new penalty will be adjusted for tax inflation. Ask for tax planning services in USA to adjust your tax inflation for financial advisory & wealth management.

IRS Issues Tax Inflation Adjustments 2020 in USA:

The dollar amount for each and every tax items for the tax year 2020 of greatest interest are listed below; that will be applicable for the most of taxpayers in the United States:

  • For tax year 2020, the standard deduction for married couple who are filing jointly is increased to $24,800, which was $400 less in the previous taxation year 2019.
  • The standard deduction for single taxpayers and married individuals filing separately is increased to $12,400 for tax year 2020 that was $200 less in the prior tax year 2019.
  • The standard deduction for heads of households has been increased to $18,650 for tax year 2020 that was $300 less in the previous tax year 2019.
  • The personal exemption for the tax year 2020 remains same as that of 2019 and residue at zero. The Tax Cuts and Jobs Act have a provision to this elimination of the personal exemption. Get more help by IRS online tax forum seminars for taxpayers’ education so that they can prepare wisely for their taxes in USA.
  • The marginal rates for the tax year 2020 in the United States are also different. The top tax rate for individual single taxpayers as well as married couples filing jointly in USA are:

Tax Inflation Adjustments for individuals:

  • 37% for incomes greater than $518,400 for individual single taxpayers and $622,050 for married couples filing jointly.
  • 35%, for incomes greater than $207,350 for individual single taxpayers and $414,700 for married couples filing jointly.
  • 32% for incomes greater than $163,300 for individual single taxpayers and $326,600 for married couples filing jointly.
  • 24% for incomes greater than $85,525 for individual single taxpayers and $171,050 for married couples filing jointly.
  • 22% for incomes greater than $40,125 for individual single taxpayers and $80,250 for married couples filing jointly.
  • 12% for incomes greater than $9,875 for individual single taxpayers and $19,750 for married couples filing jointly.
  • 10% for incomes greater than $9,875 or less for individual single taxpayers and $19,750 for married couples filing jointly.
  • There is no limitation on itemized deductions for the tax year 2020. This is the same scenario as seen in tax years 2019 and 2018. The Tax Cuts and Jobs Act resulted in the elimination of that limitation on itemized deductions. Prepare now for taxation in USA and enjoy no limits on itemized deductions in 2020.
  • For tax year 2020, $72,900 is the Alternative Minimum Tax exemption amount for individual single taxpayers and it begins to phase out at $518,400. The 2019 Alternative Minimum Tax exemption for single individual taxpayers was $71,700 and the exemption began to phase out at $510,300. Moreover, Alternative Minimum Tax exemption amount for married couples filing jointly in 2020 is $113,400 that begins to phase out at $1,036,800. The 2019 Alternative Minimum Tax exemption for married couples filing jointly was $111,700 and the exemption began to phase out at $1,020,600.

More on IRS Tax Inflation Adjustments:

  • The maximum Earned Income Credit amount in the tax year 2020 for qualifying taxpayers who have three or more qualifying children is increased up to $6,660 that was $6,557 for tax year 2019. Revenue Procedure 2019-44 (PDF) also provides the tabular details regarding maximum credit amounts for other categories, income thresholds as well as phase-outs.
  • The monthly limitation for the qualified transportation fringe benefit is increased to $270 in the tax year 2020. The tax year 2019 monthly limitation for qualified parking was $265.
  • The dollar limitation for employee salary reductions has also been increased for the taxable years beginning in 2020. The limits for contributions to health flexible spending arrangements is $2,750 for tax year 2020 that was $50 lesser in previous tax year 2019. You can also get our retirement planning advisory in USA to utilize your salary reductions in tax year 2020 for the betterment of your future.
  • Those taxpayers in USA, who have self-only coverage in a Medical Savings Account, should have an annual deductible that is not less than $2,350 for tax year 2020. The limit was the same in the prior tax year 2019. However, the upper range limit has been changed; to not more than $3,550 that was $50 lesser in tax year 2019. The maximum out-of-pocket expense amount for self-only coverage is $4,750 that was $100 lesser in tax year 2019. The limit for the annual deductible for taxpayers with family coverage is $4,750 that was $4,650 in tax year 2019. On the other hand, the deductible limit cannot exceed from $7,100 that was $100 lesser in tax year 2019. The out-of-pocket expense limit for family coverage is $8,650 for tax year 2020 that was $100 lesser in tax year 2019. If you need any further help, contact us.

The final words on IRS Tax Inflation 2020:

  • For the determination of the reduction in the Lifetime Learning Credit; by joint filers to adjust gross income amount; the limit has been increased to $118,000 for tax year 2020 that was $116,000 for tax year 2019.
  • The foreign earned income exclusion is $107,600 tax year 2020; that is increased from a total of $105,900 for tax year 2019.
  • The basic exclusion amount for estates of decedents who die during 2020 is increased; to $11,580,000 that was $11,400,000 for those estates of decedents who died in year 2019.
  • The annual exclusion for gifts is similar in tax year 2020 as that of 2019 and the limit is $15,000.
  • The amount of qualified adoption expenses is also increased for calendar year 2020. For tax year 2020, the maximum credit allowed for adoptions rises to $14,300 that was $14,080 in tax year 2019.

Along with it, IRS increased 401(k) contributions & benefit limits in USA. To get more information regarding your tax inflation limit in the United States, request call back with our representative. Share your thoughts in the comments section regarding IRS Issues Tax Inflation Adjustments.

 

 

 

 


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