2020 Tax Season Updates Announced

Nov 18, 2019 | Biz Taxes, IRS, Personal

Over the last couple weeks, the IRS has announced a few updates that will apply to the 2020 tax-filing season (for returns processed in 2021). Keep these changes in mind while planning your finances.

Retirement Plan Contribution Limits Increased

» The limit on elective deferral contributions to Sec. 401(k) plans, Sec. 403(b) plans, most Sec. 457 plans, and the federal government’s Thrift Savings Plan increases to $19,500 in 2020, up from $19,000 in 2019. If you’re 50+, the catch-up contribution limit increases to $6,500 in 2020, up from $6,000 in 2019.

» The maximum deductible IRA contribution for 2020 remains at $6,000. If you also have a workplace retirement plan, your ability to deduct your IRA contribution is phased out depending on your adjusted gross income (AGI):

  • $65,000-$75,000 for singles and heads of household
  • $104,000 to $124,000 for married couples filing jointly, where the spouse who makes the IRA contribution is covered by a workplace retirement plan
  • $196,000 and $206,000 for married couples filing jointly, where the spouse who makes the IRA contribution is NOT covered by a workplace retirement plan but is married to someone who is.

» If you contribute to a Roth IRA, the phaseout range for determining the maximum contribution increases to $196,000 to $206,000 for married couples filing jointly, and $124,000 to $139,000 for singles and heads of household.

» The AGI limit for the Retirement Savings Contribution Credit (Saver’s Credit) also increases slightly for 2020: $65,000 for married couples filing jointly, $48,750 for heads of household, and $32,500 for single taxpayers and for married individuals filing separately.

Inflation Adjustments and Tax Table Changes

» The Standard Deduction increases to $24,800 for married individuals filing joint returns or surviving spouses, $18,650 for heads of household, and $12,400 for unmarried individuals (other than surviving spouses) and married individuals filing separate returns.

» The Earned Income Tax Credit (for taxpayers with three or more children) increases to $6,660, up from $6,557 in 2019. The Adoption Tax Credit also increases to $14,300, up from $14,080 in 2019.

» The 2020 exemption amounts for the Alternative Minimum Tax rises to $113,400 for married individuals filing joint returns and surviving spouses, $72,900 for unmarried individuals (other than surviving spouses), $56,700 for married individuals filing separate returns, and $25,400 for estates and trusts.

» The Sec. 179 depreciation deduction for small businesses increases to $1,040,000, with a phaseout threshold of $2,590,000.

» The Sec. 199A income deduction threshold for a qualified trade or business increases to $326,600 for married individuals filing joint returns, and $163,300 for married individuals filing separate returns, single individuals, and heads of household.

For more details on these updates, or help planning your finances in relation to these changes, please give us a call today.

The information provided here by Premier CPA Services PC is for general information only. It does not constitute legal, accounting, tax or other professional advice or services, and is presented without any representation or warranty as to the accuracy or completeness of the information. Please contact us for information as it relates to your circumstances.
The information provided here by Premier CPA Services PC is for general information only. It does not constitute legal, accounting, tax or other professional advice or services, and is presented without any representation or warranty as to the accuracy or completeness of the information. Please contact us for information as it relates to your circumstances.