Key Tax Changes for 2020

Key Tax Changes for 2020

· 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.  

· 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 tax rate is 10% for incomes of single individuals with incomes of $9,875 or less ($19,750

for married couples filing jointly).

· The Social Security annual wage base is $137,700 for 2020 (up $4,800 from last year).

· The personal exemption for tax year 2020 remains at 0, as it was for 2019.

· For 2020, as in 2019 and 2018, there is no limitation on itemized deductions.

· The 2017 tax reform law's revamp of the "kiddie tax" has been repealed. Prior to 2018, and now applicable again for 2020, children age 18 or younger (under 24 if a student) were taxed on unearned income in excess of a certain amount at their rate or their parents' rate, whichever was higher.

· The tax year 2020 maximum Earned Income Credit amount is $6,660 for qualifying taxpayers who have three or more qualifying children, up from a total of $6,557 for tax year 2019.

· The lifetime estate and gift tax exemption for 2020 jumps from $11.4 million to $11.58 million, and $23.16 million for couples ($22.8 million for 2019) if portability is elected by timely filing Form 706 after the death of the first-to-die spouse. The estate tax rate remains at 40%.

· The annual exclusion for gifts is $15,000 for calendar year 2020, as it was for calendar year 2019.

· The maximum credit allowed for adoptions for tax year 2020 is the amount of qualified adoption expenses up to $14,300, up from $14,080 for 2019.

· There are two expansions to 529 college savings plans starting in 2020. First, funds can now be used to pay for fees, books, supplies and equipment for certain apprenticeship programs. In addition, up to $10,000 in total (not annually) can be withdrawn to pay off student loans.

· The cap on employer-provided tax-free parking goes up from $265 to $270 a month in 2020.