IRS Publishes Inflation Adjustments for 2020

The IRS has announced the tax year 2020 annual inflation adjustments, including the tax rate schedules and other tax items. Learn how it may affect you.

As it typically does, the IRS has made inflation adjustments for various tax items for the coming year — 2020. More details can be found in Rev. Proc. 2019-44. Below are the adjustments that apply to a wide range of taxpayers.

Inflation Adjustments

The standard deduction for married filing jointly rises to $24,800 for tax year 2020, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,400 for 2020, up $200, and for heads of households, the standard deduction will be $18,650 for tax year 2020, up $300.

The personal exemption for tax year 2020 remains at 0, as it was for 2019. This elimination of the personal exemption was a provision of the Tax Cuts and Jobs Act.

Marginal rates: For tax year 2020, the top tax rate remains 37% for individual single taxpayers with incomes higher than $518,400 ($622,050 for married couples filing jointly). The other rates are:

  • 35% for incomes over $207,350 ($414,700 for married couples filing jointly).
  • 32% for incomes over $163,300 ($326,600 for married couples filing jointly).
  • 24% for incomes over $85,525 ($171,050 for married couples filing jointly).
  • 22% for incomes over $40,125 ($80,250 for married couples filing jointly).
  • 12% for incomes over $9,875 ($19,750 for married couples filing jointly).
  • The lowest rate is 10% for single individuals with incomes of $9,875 or less ($19,750 for married couples filing jointly).

For 2020, as in 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.

inflation adjustments

Additional Inflation Adjustments

The alternative minimum tax exemption amount for tax year 2020 is $72,900, and it begins to phase out at $518,400 ($113,400 for married couples filing jointly, for whom the exemption begins to phase out at $1,036,800). The 2019 exemption amount was $71,700, and began to phase out at $510,300 ($111,700, for married couples filing jointly, for whom the exemption began to phase out at $1,020,600).

The new maximum earned income credit amount is $6,660 for qualifying taxpayers who have three or more qualifying children, up from a total of $6,557 for tax year 2019.

The qualified transportation fringe benefit now has a monthly limitation of $270. The monthly limitation for qualified parking is the same, up from $265 for tax year 2019.

The dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $2,750, up $50 from the limit for 2019.

The annual exclusion for gifts is $15,000 for calendar year 2020, as it was for calendar year 2019.

This is not a comprehensive list, and there are subtleties that you should discuss with a professional in the new year.

© 2019

Feature image by Olga DeLawrence on Unsplash

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Latest Release of IRS Crypto Tax Information – Interview with Brad Kimes on XRP

We’ve just had the biggest release of IRS crypto tax information in the past five years. Here’s what to know and how to be prepared as a crypto trader.

This week has been the biggest release of IRS crypto tax information in the past five years. What is going on and what does this mean for you as a crypto trader?

I discuss this big news, and answer important questions it brings up, in my latest interview with Brad Kimes of XRP. If you haven’t already, watch the interview now. 

What Comes Next?

Over the next month, I’ll be writing more in-depth about this latest IRS crypto tax information and what you can do to be prepared as a crypto trader. 

In the meantime, subscribe to my newsletter to be notified of that and other important information regarding US crypto taxes. 

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Beyond IRS Crypto Tax Information

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With this background, I’ve written several books that can help you with your crypto taxes.

IRS Publishes Final and Proposed Regs on 100% Depreciation

Learn the latest about depreciation, the TCJA (passed two years ago), and how it’s affected by the latest regulatory changes by the IRS.

The IRS has issued final regulations in September to finalize the proposed regulations issued in August 2018, which implement several provisions included in the Tax Cuts and Jobs Act (TCJA). The proposed regulations contain new provisions not addressed previously.

Depreciation According to the IRS

  • The 100% additional first year depreciation deduction generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify.
  • The deduction applies to qualifying property acquired and placed in service after September 27, 2017. The final regulations provide clarifying guidance on the requirements that must be met for property to qualify for the deduction, including used property. The final regulations also provide rules for qualified film, television and live theatrical productions.
  • In the proposed regulations, the Treasury Department and IRS propose rules regarding (i) certain property not eligible for the additional first year depreciation deduction, (ii) a de minimis use rule for determining whether a taxpayer previously used property; (iii) components acquired after Sept. 27, 2017, of larger property for which construction began before Sept. 28, 2017; and (iv) other aspects not dealt with in the previous August 2018 proposed regulations.
  • The proposed regulations also withdraw and repropose rules regarding application of the used property acquisition requirements (i) to consolidated groups, and (ii) to a series of related transactions.

Learn More About the IRS and Depreciation

More information is available on the IRS site. To see how these regulations may affect you, contact a qualified professional.

©2019