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IRS Releases Inflation-Adjusted Amounts for 2020

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IRS Releases Inflation-Adjusted Amounts for 2020

The income tax brackets, standard deduction amounts, and many other tax items are adjusted annually for cost-of-living increases. On Tuesday, November 6, 2019, the IRS released the adjustments that will apply for the 2020 tax year. Below is a highlight of some of those adjustments.

Ordinary income. For married individuals filing joint returns and surviving spouses, the top tax rate will be imposed on income over $622,050, up from $612,351 in 2019. The imposition of the top tax rate will begin, for single individuals at $518,401 ($510,301 in 2019), for heads of household at $518,401 ($510,301 in 2019), and for married filing separate returns at $311,026 ($306,176 in 2019). For estates and trusts, the top rate is now imposed on income over $12,950 ($12,750 in 2019).

Standard Deduction. The standard deduction has been increased as follows: $24,800 for a joint return or surviving spouse ($24,400 in 2019); $12,400 for single ($12,200 in 2019); $18,650 for head of household ($18,350 in 2019); and $12,400 for married filing separate returns ($12,200 in 2019).

Capital gains. The 20% capital gains rate will apply to adjusted net capital gain over: $496,600 for joint returns and surviving spouses ($488,850 in 2019); $441,450 for single ($434,550 in 2019); $469,050 for heads of household ($461,700 in 2019); $248,300 for married taxpayers filing separately ($244,425 in 2019); and $13,150 for estates and trusts ($12,950 in 2019).

Refundable child credit. For 2020, the refundable portion of the child tax credit for any qualifying child cannot exceed $1,400 (same as for 2019).

Unified estate and gift tax exclusion amount. For gifts made and estates of decedents dying in 2020, the exclusion amount will be $11,580,000 (up from $11,400,000 for gifts made and estates of decedents dying in 2019).

Generation-skipping transfer (GST) tax exemption. The exemption from GST tax will be $11,580,000 for transfers in 2020 (up from $11,400,000 for transfers in 2019).

Gift tax annual exclusion. For gifts made in 2020, the gift tax annual exclusion will be $15,000 (same as 2019).

Adjustments were also made to many other items, including the AMT figures, qualified transportation fringe benefits, and qualified retirement plan distributions and contributions. For more information, see Revenue Procedure 2019-44, 2019-47 IRB, and Notice 2019-59, 2019-46 IRB 1.

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