Everyone knows that tax season doesn’t really get underway until at least February as citizens scramble to complete their returns before April. However, with the end of the calendar year just ahead, the Internal Revenue Services — better known by the simple initials IRS — is already talking taxes. This week the agency officially revealed changes for the 2020 tax year, including an increase to the standard deduction and adjustments to tax brackets.
Among the adjustments the IRS is making for the upcoming tax changes is an increase to the standard deduction. For couples filing jointly, the deduction will rise $400 to $24,000. As you might expect, the individual deduction will be exactly half of that, climbing $200 to $12,400 for 2020. Meanwhile the standard deduction for heads of households will go to $18,650, marking a $300 increase.
The IRS is also making adjustments to the marginal tax brackets for 2020. This includes raising the cap for the 10% tax bracket to $9,875 and $19,750 for individuals and married couples filing jointly respectively. On the high end, this means that the 37% tax rate will kick in at $518,400 for individuals (up from $510,300 in 2019) and $622,050 for married couples filing jointly (increased from $612,305).
| Rate | 2020 Individuals | 2019 Individuals | 2020 Married Filing Jointly | 2019 Married Filing Jointly |
| 10% | Up to $9,875 | Up to $9,700 | Up to $19,750 | Up to $19,400 |
| 12% | $9,876 to $40,125 | $9,701 to $39,475 | $19,751 to $80,251 | $19,401 to $78,950 |
| 22% | $40,126 to $85,525 | $39,476 to $84,200 | $80,251 to $171,050 | $78,951 to $168,400 |
| 24% | $85,526 to $163,300 | $84,201 to $160,725 | $171,051 to $326,600 | $168,401 to $321,450 |
| 32% | $163,301 to $207,350 | $160,726 to $204,100 | $326,601 to $414,700 | $321,451 to $408,200 |
| 35% | $207,351 to $518,400 | $204,101 to $510,300 | $414,701 to $622,050 | $408,201 to $612,350 |
| 37% | Over $518,400 | Over $510,300 | Over $622,050 | Over $612,350 |
As for some of the other changes in store for the new tax year, the maximum Earned Income Credit taxpayers who have three or more qualifying children will go from $6,557 to $6,660. Elsewhere the dollar limits for employee salary reductions for health flexible spending contributions will increase by $50 to reach $2,750. Also notable for ex-pats is that the foreign earned income exclusion is rising to $107,600 in 2020 from $105,900 in 2019.
Overall the changes the IRS is making for 2020 aren’t nearly as earthshattering as the overhauls we saw following the passage of the Tax Cuts and Jobs Act in 2017. Nevertheless it’s always interesting to see the adjustments made year after year. Of course this isn’t an exhaustive list of the agency’s announcement so, for more on what’s ahead in 2020, be sure to check out the official IRS website.
