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IRS Adjusts Tax Rates for Individuals for 2020

January 05, 2021

The IRS has adjusted tax rates, standard deduction amounts, AMT limitations and more. Check out what’s changed for tax year 2020.

Taxpayers will want to read up on the IRS’ annual inflation adjustments for tax year 2020. Though released last year, these rates apply to this coming filing season. More than 60 tax provisions have changed, here are some of those changes.

Interested in learning more about maximizing tax savings before year end? Check out our Year End Tax Planning Guide for Individuals.

Tax rates

Tax Rate

Single

Head of Household

Married Filing Jointly/ Surviving Spouse

Married Filing Separately

10%

$0 to $9,875

$0 to $14,100

$0 to $19,750

$0 to $9,875

12%

$9,876 to $40,125

$14,101 to $53,700

$19,751 to $80,250

$9,876 to $40,125

22%

$40,126 to $85,525

$53,701 to $85,500

$80,251 to $171,050

$40,126 to $85,525

24%

$85,526 to $163,300

$85,501 to $163,300

$171,751 to $326,600

$85,526 to $163,300

32%

$163,301 to $207,350

$163,301 to $207,350

$326,601 to $414,700

$163,301 to $207,350

35%

$207,351 to $518,400

$207,351 to $518,400

$414,701 to $622,050

$207,351 to $311,025

37%

Over $518,400

Over $518,400

Over $622,050

Over $311,025

Standard deduction

Single and married filing separately taxpayers- $12,400

Married filing jointly- $24,800

Heads of household- $18,650

Personal exemption

Remains 0 (elimination of personal exemption was a TCJA provision)

Itemized deduction

No limitation on itemized deduction (eliminated by TCJA)

AMT Exemption Amounts

Individuals- $72,900

Married filing jointly & surviving spouses- $113,400

Married filing separately- $56,700

Trusts & estates- $25,400

Earned income tax credit

Maximum credit allowed is $538 if taxpayer has no qualifying children, $3,584 if there is one qualifying child, $5,920 for two qualifying children and $6,660 for three.

Qualified transportation fringe benefit

$270 (monthly limitation each for qualified parking, commuter highway vehicle and any transit pass)

Contributions to health flexible spending arrangements

Beginning in 2020, the dollar limitation for employee salary reductions for contributions to health FSAs is $2,750.

Medical savings account

Participants with self-only coverage in a medical savings account are allowed an annual deductible no less than $2,350 and no more than $3,550.

For self only coverage, the max out of pocket expense is $4,750.

Participants with family coverage- the floor for the annual deductible is $4,750 and no more than $7,100.

For family coverage, the out of picket expense limit is $8,650.

Lifetime learning credit

The adjusted gross income amount used by joint filers to assess the reduction in the lifetime learning credit is $118,000.

Foreign earned income exclusion

$107,600

Estates of decedents

For estates of decedents who pass away during 2020, they have a basic exclusion amount of $11,580,000.

Annual exclusion for gifts

$15,000

Adoptions

The maximum credit for adoptions in 2020 is $14,300.

Don’t forget to check out our 2020 Year End Tax Planning Guide for Individuals.

Questions? Contact us.

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