What Lies Ahead for the 2020 Tax Year

The 2019 tax year is quickly coming to an end and we are getting closer and closer to a new tax filing season. While it is still not too late to prepare yourself and make the most of your deductions for 2019, the Internal Revenue Service is always looking forward to the future. In preparation for a new year, the IRS has released a breakdown of what lies ahead for the 2020 tax year. While the changes for the 2020 tax year are nowhere near as groundbreaking as they were for 2019, the updates do reflect annual inflation adjustments.

• Standard Deduction: The standard deduction for married taxpayers who file joint tax returns will increase to $24,800 ($400 increase from 2019), while the standard deduction for single taxpayers and married taxpayers who file separate tax returns will increase to $12,400 ($200 increase from 2019). For heads of household, the standard deduction will increase to $18,650 ($300 increase from 2019).
• 2020 Tax Brackets:

• Retirement Savings Contributions: The IRS has raised the employee contribution limit for 401(k), 403(b) and most 257 plans to $19,500 ($500 increase from 2019). If you’re 50 or older, you can contribute an additional $6,500 ($500 increase from 2019). The contribution limit for individual retirement accounts (IRA), both traditional and Roth, is holding steady at $6,000, plus an additional $1,000 for taxpayers 50 and older.
• Healthcare Savings Contributions: The HSA contribution limit will increase to $3,550 ($50 increase from 2019) for self-only health coverage. Family plan coverage HSA contribution limit will increase to $7,100 ($100 increase from 2019). The IRS also bumped up the amount you can save in a healthcare flexible spending plan (FSA) for 2020 – the limit will be $2,750 ($50 increase from 2019).
• Estate and Gift Taxes: The IRS has increased the lifetime gift and estate tax exemption to $11.58 million per individual (up from $11.4 million in 2019). The annual gift tax exclusion will hold steady at $15,000 – no change from 2019.

For help understanding these updates and their potential impacts on you or your business, please contact your HORNE tax advisor.