IRS Announces Inflation-Adjusted Standard Deduction Amounts for 2020

The IRS issued its annual inflation adjustments for key tax items for the tax year 2020. Among them are new amounts for standard deductions.

For the tax year 2020, the standard deduction for a married couple filing jointly will be raised from $24,400 to 24,800. For single taxpayers and married couples filing separately, the standard deduction will be raised from $12,200 to 12,400. For heads of households, the standard deduction will be $18, 650.

Margin tax rates will change as follows:

• 37 percent for incomes ≥ $518,400, $622,050 for married couples filing jointly
• 35 percent for incomes over $207,350, $414,700 for married couples filing jointly
• 32 percent for incomes over $163,300, $326,600 for married couples filing jointly
• 24 percent for incomes over $85,525, $171,050 for married couples filing jointly
• 22 percent for incomes over $40,125, $80,250 for married couples filing jointly
• 12 percent for incomes over $9,875, $19,750 for married couples filing jointly
• 10 percent for incomes ≤ $9,875, $19,750 for married couples filing jointly

For tax year 2020, the foreign earned income exclusion is $107,600, an increase from $105,900 for tax year 2019.

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 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.

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.

In tax year 2020, for 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. For self-only coverage, the maximum out-of-pocket expense amount is $4,750, up $100 from 2019. In tax year 2020, for 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. For family coverage, the out-of-pocket expense limit is $8,650 for tax year 2020, an increase of $100 from tax year 2019.

If you have questions about any of the new adjusted tax amounts, or would like to discuss tax planning for 2020, contact us.