The Internal Revenue Service released its inflation adjustments for the tax year 2020. Approximately 60 provisions have been adjusted for inflation, including marginal tax rates. Some of the key elements have been summarized below. See IRS Revenue Procedure 2019-44, https://www.irs.gov/pub/irs-drop/rp-19-44.pdf , for additional details regarding these annual adjustments.
Marginal Tax Rates
The amounts in each cell represent the maximum taxable income earned before moving up to the next bracket.
| Rate | Single | Married filing jointly | Married filing separately | Head of household | ||||
| Tax year | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 |
10% | $9,700 | $9,875 | $19,400 | $19,750 | $9,700 | $9,875 | $13,850 | $14,100 |
| 12% | $39,475 | $40,125 | $78,950 | $80,250 | $39,475 | $40,125 | $52,850 | $53,700 |
| 22% | $84,200 | $85,525 | $168,400 | $171,050 | $84,200 | $85,525 | $84,200 | $85,500 |
| 24% | $160,725 | $163,300 | $321,450 | $326,600 | $160,725 | $163,300 | $160,700 | $163,300 |
| 32% | $204,100 | $207,350 | $408,200 | $414,700 | $204,100 | $207,350 | $204,100 | $207,350 |
| 35% | $510,300 | $518,400 | 612,350, | $622,050 | $306,175 | $311,025 | $510,300 | $518,400 |
| 37% | >$510,300 | >$518,400 | >$612,350 | >$622,050 | >$306,175 | > $311,025 | >$510,300 | >$518,400 |
Alternative Minimum Tax
The Alternative Minimum Tax (AMT) is intended to apply a certain minimum tax to higher income taxpayers by limiting or eliminating certain credits, exclusions, and deductions. The IRS exempts taxable income from AMT up to a certain level (AMT exemption amount) and then gradually phases out the exemption. Those amounts are shown below.
| Single / Head of household | Married filing jointly | Married filing separately | ||||
| Tax year | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 |
Exemption | $71,700 | $72,900 | $111,700 | $113,400 | $55,850 | $56,700 |
| Phase out | $510,300 | $518,400 | $1,020,600 | $1,036,800 | $510,300 | $518,400 |
Standard deduction
One can itemize deductions on personal returns for expenses such as mortgage interest, property taxes, and charitable contributions, or take the standard deduction if it exceeds the amount afforded by itemizing. There is no limitation on itemized deductions (limitation was repealed in 2018) but some deductions are capped at certain levels (for example, combined limit on state and local income taxes and property taxes capped at $10,000), and some deductions have been eliminated (for example, unreimbursed business expenses). The standard deduction amounts have been significantly increased as a result, and those amounts are shown below.
| Single / Married filing separate | Married filing jointly | Head of household | |||
| 2019 | 2020 | 2019 | 2020 | 2019 | 2020 |
| $12,200 | $12,400 | $24,800 | $24,400 | $18,350 | $18,650 |
If you have questions on how any of these changes affect your personal tax situation or need assistance preparing your tax returns for 2020, contact us.
