IRS Provides Tax Inflation Adjustments for Tax Year 2020
- November 11, 2019
- Posted by: Hansen_Sweeney
- Category: News, Tax
On Wednesday of this week the Internal Revenue Service announced the tax year 2020 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2019–44 provides details about these annual adjustments.
The tax law change covered in the revenue procedure was added by the Taxpayer First Act of 2019, which increased the failure to file penalty to $330 for returns due after the end of 2019. The new penalty will be adjusted for inflation beginning with tax year 2021.
The tax year 2020 adjustments generally are used on tax returns filed in 2021. We highlight some of the more interesting provisions, as follows:
- The personal exemption for tax year 2020 remains at 0, as it was for 2019, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
- The standard deduction for married filing jointly rises to $24,800 for tax year 2020, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,400 in for 2020, up $200, and for heads of households, the standard deduction will be $18,650 for tax year 2020, up $300.
- 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). The lowest rate is 10% for incomes of single individuals with incomes of $9,875 or less ($19,750 for married couples filing jointly).
- For 2020, as in 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
- For tax year 2020, the foreign earned income exclusion is $107,600 up from $105,900 for tax year 2019.
- Estates of decedents who die during 2020 have a basic exclusion amount of $11,580,000, up from a total of $11,400,000 for estates of decedents who died in 2019.
- The annual exclusion for gifts is $15,000 for calendar year 2020, as it was for calendar year 2019.