As an example, let's say you're married filing jointly with your spouse in 2020 and that you pay $8,000 in mortgage interest, paid $5,000 in state and local taxes, and donated $2,000 to charity. The IRS recently announced the updated standard deduction for 2020, so here's what yours will be and what it will mean. 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. Should you claim the standard deduction? ( Learn more .) The Alternative Minimum Tax exemption amount for tax year 2020 is $72,900 and begins to phase out at $518,400 ($113,400 for married couples filing jointly for whom the exemption begins to phase out at $1,036,800).The 2019 exemption amount was $71,700 and began to phase out at $510,300 ($111,700, for married couples filing jointly for whom the exemption began to phase out at $1,020,600). If you're one of the majority of Americans who use the standard deduction every year, this is good news. Here's a quick check that can help you determine if you're likely to itemize deductions in 2020. The standard deduction is now $12,200 for single filers and $24,400 for married couples filing jointly. It’s important to remember that moving up into a higher tax bracket does not mean that all of your income will be taxed at the higher rate. The Ascent is The Motley Fool's new personal finance brand devoted to helping you live a richer life. To be clear, this is the amount of your adjusted gross income (AGI) that you can exclude from federal income taxes. In general, 2020 personal income tax returns are due by April 15, 2021. The tax items for tax year 2020 of greatest interest to most taxpayers include the following dollar amounts: The lowest rate is 10% for incomes of single individuals with incomes of $9,875 or less ($19,750 for married couples filing jointly). To be clear, this is an inflation-driven adjustment, and hopefully your wages grow from 2019 to 2020 as well. Tax deductions lower your taxable income. Keep Buying Anyway, 3 Outdated Retirement Rules That Could Cost You, 3 Reasons a Roth IRA Is a Perfect Supplement to Social Security, Could You Live on $18,168 a Year in Retirement? For tax year 2020, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $118,000, up from $116,000 for tax year 2019. For tax year 2020, the monthly limitation for the qualified transportation fringe benefit is $270, as is the monthly limitation for qualified parking, up from $265 for tax year 2019. The tax rates for 2020 are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. See you at the top! Matt specializes in writing about bank stocks, REITs, and personal finance, but he loves any investment at the right price. Complete your filing in less than 15 minutes and get your refund as fast as possible. 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 standard deduction for married filing jointly rises to $24,800 for tax year 2020, up $400 from the prior year. There are two main types of tax deductions: the standard deduction and itemized deductions. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Just to name a few, you can still deduct your pre-tax retirement plan contributions and student loan interest regardless of whether you itemize. So it's likely that you'll use the standard deduction on your 2020 tax return. 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. Here are the 2020 standard deductions amounts for each filing status: There is an additional standard deduction of $1,300 for taxpayers who are over age 65 or blind. 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. Market data powered by FactSet and Web Financial Group. We strive to be the most user-friendly tax-related platform. An official website of the United States Government. Here are the 2020 standard deductions amounts for each filing status: There is an additional standard deduction of $1,300 for taxpayers who are over age 65 or blind. For tax year 2020, the foreign earned income exclusion is $107,600 up from $105,900 for tax year 2019. Your medical expenses were less than 10% of your adjusted gross income. For tax year 2020, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,350, the same as for tax year 2019; but not more than $3,550, an increase of $50 from tax year 2019. The tax year 2020 adjustments generally are used on tax returns filed in 2021. To be clear, this is the amount of … “For 2020, the standard deduction for a single person is $12,400 and $24,800 for a couple 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. Each year, taxpayers have the choice to use itemize deductions or use the standard deduction, whichever is the most financially beneficial choice for them. For 2019, it will be returning to its more incremental year-to … In 2018, it was $12,000. WASHINGTON — The Internal Revenue Service today announced the tax year 2020 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. The federal tax brackets are broken down into seven (7) taxable income groups, based on your filing status. The amount of the additional standard deduction increases to $1,650 for taxpayers who are unmarried. The 2020 standard deduction For 2020, the standard deduction is rising by $200 to $400, depending on your filing status. This gives you a total of $15,000 of itemizable deductions, which is substantially less than the $24,800 standard deduction to which you'd be entitled. This article gives you the tax rates and related numbers that you will need to prepare your 2020 income tax return. Stock Advisor launched in February of 2002. And if you're in a higher tax bracket, your savings will be even more. If you're in the 22% tax bracket and single, this means that you'll save $44 as compared with the 2019 standard deduction. For the majority of Americans, itemizing is not worthwhile, and that's especially true now, thanks to the higher standard deductions that the Tax Cuts and Jobs Act put in place. There are several itemizable tax deductions, but the bulk of most taxpayers' deductions come from the "big four": For most Americans, adding up these four deductions can be a good indicator of whether itemizing will be worthwhile. If you are looking for 2019 tax rates, you can find them HERE. 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. The amount of the additional standard deduction increases to $1,650 for taxpayers who are unmarried. If you're married filing jointly, you'll save $88. Let's conquer your financial goals together...faster. Only the money you earn within a particular bracket is subject to the corresponding tax rate. Use our simple IRS search, 2020 Federal Tax Rates, Brackets, & Standard Deductions, $4,617.50 + 22% of the amount over $40,125, $14,605.50 + 24% of the amount over $85,525, $33,271.50 + 32% of the amount over $163,300, $47,367.50 + 35% of the amount over $207,350, $156,235 + 37% of the amount over $518,400, $29,211 + 24% of the amount over $171,050, $66,543 + 32% of the amount over $326,600, $94,735 + 35% of the amount over $414,700, $167,307.50 + 37% of the amount over $622,050, $33,271.50 + 32% of the amount of $163,300, $83,653.75 + 37% of the amount over $311,025, $31,830 + 32% of the amount over $163,300, $45,926 + 35% of the amount over $207,350, $154,793.50 + 37% of the amount over $518,400, Married Filing Jointly or Qualifying Widow(er). Returns as of 10/06/2020. Cumulative Growth of a $10,000 Investment in Stock Advisor, Here's the 2020 IRS Standard Deduction -- And What It Means to You @themotleyfool #stocks, The S&P 500 Was Down 4% in September. It's the easiest and most accurate way to file your tax returns for both federal and state. Still have questions or can’t find what you are looking for? Here's a chart that can help you find your 2020 standard deduction and how much it's changed: Not all tax deductions require you to itemize to take advantage. The idea is that if your individual deductions add up to more than the standard deduction, it's worth itemizing (also known as the "long way" to do your taxes). For the taxable years beginning in 2020, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $2,750, up $50 from the limit for 2019. The revenue procedure contains a table providing maximum credit amounts for other categories, income thresholds and phase-outs. About Us. Here are the tax rate brackets for each filing status: NOTE: There are no personal exemption amounts for 2020. (adsbygoogle = window.adsbygoogle || []).push({}); IRS Reopens Registration Period for Economic Impact Payments, Trump Signs 4 New Executive Orders for Coronavirus Relief, What to Expect from the Second Coronavirus Stimulus Package, The CARES Act: What You Should Know About the Coronavirus Relief Stimulus Package, $484 Billion Interim Coronavirus Relief Bill Signed Into Law. File Your Taxes Online In a nutshell, it means you'll get to exclude a little bit more of your money from taxation next year. This means the standard deduction will increase between $200 and $400 in 2020 depending on your filing status. IRS.com is a privately owned website that is not affiliated with any government agencies. The Setting Every Community Up for Retirement Enhancement Act, better known as the SECURE Act, was passed at the end of 2019 and increased the minimum penalty for failure to file from $330 to $435. The annual exclusion for gifts is $15,000 for calendar year 2020, as it was for calendar year 2019. The standard deduction for married filing jointly rises to $24,800 for tax year 2020, up $400 from the prior year. Page Last Reviewed or Updated: 19-Sep-2020, Request for Taxpayer Identification Number (TIN) and Certification, Employers engaged in a trade or business who pay compensation, Electronic Federal Tax Payment System (EFTPS), Treasury Inspector General for Tax Administration, IRS provides tax inflation adjustments for tax year 2020. 2020 Standard Deduction Amounts . The IRS allows you to claim one type of tax deduction, but not both. IRS.COM is a non-government website designed to help taxpayers find accurate, easy-to-understand tax information, valuable tax products, and tax-related services. Here's Why You Might Have To, Making These 2 Moves Now Could Ensure an Almost Tax-Free Retirement, Copyright, Trademark and Patent Information, State and local taxes (SALT), including property taxes and state income. For tax year 2020, participants with family coverage, the floor for the annual deductible is $4,750, up from $4,650 in 2019; however, the deductible cannot be more than $7,100, up $100 from the limit for tax year 2019.