2020 Tax Deduction Amounts And More

2020 Tax Deduction Amounts And More

These are the numbers for the tax year 2020 beginning January 1, 2020. They are not the numbers and tables that you’ll use to prepare your 2019 tax returns in 2020 (you’ll find them here). These are the numbers that you’ll use to prepare your 2020 tax returns in 2021.

If you aren’t expecting any significant changes in 2020, you can use the updated numbers to estimate your liability. If you plan to make more money or change your circumstances (i.e., get married, start a business, have a baby), consider adjusting your withholding or tweaking your estimated tax payments. To check out the new IRS withholding estimator, click here.

Tax Brackets and Tax Rates. There are seven (7) tax rates in 2020. They are: 10%, 12%, 22%, 24%, 32%, 35% and 37% (there is also a zero rate). Here’s how those break out by filing status:

 

Standard Deduction Amounts. The standard deduction amounts will increase to $12,400 for individuals and married couples filing separately, $18,650 for heads of household, and $24,800 for married couples filing jointly and surviving spouses.

  • For 2020, the additional standard deduction amount for the aged or the blind is $1,300. The additional standard deduction amount increases to $1,650 for unmarried taxpayers.
  • For 2020, the standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,100 or the sum of $350 and the individual’s earned income (not to exceed the regular standard deduction amount).

There will be no personal exemption amount for 2020. The personal exemption amount remains zero under the Tax Cuts and Jobs Act (TCJA).

The alternative minimum tax (AMT) exemption amounts are adjusted for inflation. Here’s what those numbers look like for 2020:

Kiddie Tax. The kiddie tax applies to unearned income for children under the age of 19 and college students under the age of 24. Unearned income is income from sources other than wages and salary, like dividends and interest. Your child must pay taxes on their unearned income if that amount is more than $1,100 in 2020. Taxable income attributable to net unearned income will be taxed according to the brackets applicable to trusts and estates (see above). For earned income, the rules are the same as before.

Capital Gains rates will not change for 2020, but the brackets for the rates will change. Most taxpayers pay a maximum 15% rate, but a 20% tax rate applies if your taxable income exceeds the thresholds set for the 37% ordinary tax rate. Exceptions also apply for art, collectibles and section 1250 gain (related to depreciation). The maximum zero rate amounts and maximum 15% rate amounts break down as follows:

There are changes to itemized deductions found on Schedule A, including:

  • Medical and Dental Expenses. The “floor” for medical and dental expenses is 7.5% in 2020, which means you can only deduct those expenses which exceed 7.5% of your AGI.
  • State and Local Taxes. Deductions for state and local sales, income, and property taxes remain in place and are limited to a combined total of $10,000, or $5,000 for married taxpayers filing separately.
  • Home Mortgage Interest. You may only deduct interest on acquisition indebtedness—your mortgage used to buy, build or improve your home—up to $750,000, or $375,000 for married taxpayers filing separately. For more on mortgage interest under the TCJA/
  • Charitable Donations. As a result of tax reform, the percentage limit for charitable cash donations to public charities increased from 50% to 60% in 2018 and will remain at 60% for 2o20.
  • Casualty and Theft Losses. The deduction for personal casualty and theft losses has been repealed except for losses attributable to a federal disaster area. For more on casualty losses after a disaster.
  • Job Expenses and Miscellaneous Deductions subject to 2% floor. Miscellaneous deductions, including unreimbursed employee expenses and tax preparation expenses, which exceed 2% of your AGI have been eliminated. For more info.
  • There are no Pease limitations in 2020.

Some additional tax credits and deductions have been adjusted for 2020. Here’s a look at a few of the most popular:

  • Child Tax Credit. The child tax credit has been expanded to $2,000 per qualifying child and is refundable up to $1,400, subject to phaseouts; there is a temporary $500 nonrefundable credit for other qualifying dependents. AGI phaseouts are not indexed for inflation and remain at $400,000 for married taxpayers filing jointly and more than $200,000 for all other taxpayers. For more about the expanded CTC.
  • Earned Income Tax Credit (EITC). For 2020, the maximum EITC amount available is $6,660 for married taxpayers filing jointly who have three or more qualifying children (it’s $538 for married taxpayer with no children). Phaseouts apply.
  • Adoption Credit. For 2020, the credit for an adoption of a child with special needs is $14,300, and the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $14,300. The available adoption credit begins to phase out for taxpayers with modified adjusted gross income (MAGI) in excess of $214,520; it’s completely phased out at $254,520 or more.
  • Student Loan Interest Deduction. For 2020, the maximum amount that you can deduct for interest paid on student loans remains $2,500. The deduction begins to phase out for single taxpayers with MAGI in excess of $70,000, or $140,000 for married taxpayers filing jointly, and is completely phased out for single taxpayers at $85,000 or more, or $170,000 or more for married taxpayers filing jointly.
  • Lifetime Learning Credit. For the 2020 tax year, the adjusted gross income (AGI) amount for joint filers to determine the reduction in the Lifetime Learning Credit is $118,000; the AGI amount for single filers is $59,000.
  • Medical Savings Accounts (MSA). For 2020, a high-deductible health plan (HDHP) is one that, for participants who have self-only coverage in an MSA, has an annual deductible that is not less than $2,350 but not more than $3,550; for self-only coverage, the maximum out-of-pocket expense amount is $4,750. For 2020, HDHP means, for participants with family coverage, an annual deductible that is not less than $4,750 but not more than $7,100; for family coverage, the maximum out-of-pocket expense limit is $8,650.
  • The unpopular shared individual responsibility payment has been eliminated for the tax year 2020.
  • Foreign Earned Income Exclusion. For tax year 2020, the foreign earned income exclusion is $107,600.
  • And don’t forget section 199A (Qualified Business Income). As part of the TCJA, sole proprietors and owners of pass-through businesses are eligible for a deduction of up to 20% for qualified business income. The deduction is subject to threshold and phased-in amounts. For 2020, the threshold amounts begin at $326,600 for married taxpayers filing jointly:

How soon Can you File Taxes In California?

How Soon Can you File Taxes in California?

How early can you file your tax return in CA, when does the IRS start accepting returns, how can you get started before the IRS opens, and what does this all mean for your tax refund?

 

When is the earliest I can file?

 

Because so many of our clients are excited to get their refunds, we get asked all the time, “When is the earliest I can file my federal tax return?”

 

You cannot technically file your federal taxes until the IRS starts accepting returns. However, you can begin to fill out your return with a pay stub and complete it when you have your W-2 form or other necessary tax documents. Tax-preparation services can also help with this.

 

You can prepare and submit your return as soon as you receive your W-2s from your employers and have all the relevant information and documents. Most W-2s arrive in mid-January, but employers have until January 31, 2020, to send W-2s and Forms 1099, so you could receive yours as late as early February.

In California How Fast Can I Get My Tax Refund In 2020?

If you’re like most Americans, your tax refund feels like the biggest paycheck you’ll receive all year. Learn when you’ll be receiving your refund in 2020, and how you could hurry that process up.

 

For millions of Americans, your tax refund feels like the biggest paycheck you’ll receive all year so filing your taxes is your most important financial transaction.1

Tax Refund Timing

According to the IRS, most refunds are funded within 21 days of filing. This clock starts after the IRS begins processing tax returns for the year, which is usually at the end of January. For the upcoming tax season, the IRS announced that it will open its doors and begin processing returns on January 27, 2020.

However, due to the PATH Act, clients claiming the Earned Income Tax Credit (EITC) and/or the Additional Child Tax Credit (ACTC), should expect a delay in their refunds. Due to tax laws aimed to protect a taxpayer’s identity, refunds claiming EITC and ACTC will begin funding after February 21, 2020. Also, the refund status for those clients may not be available on the IRS.gov website until Feb 21.

It is extremely important to file early so you can get your refund as soon as possible.

You can always ask us to check the status of your refund and well give you a date of expectancy for your return to hit your bank account.

Will Your Refund Be Delayed?

In the end, how quickly you receive your tax refund depends on when you file your taxes, how you choose to file, and what credits and deductions you might claim. While refunds including EITC and ACTC will be funded no earlier than February 21, you will still benefit by filing early. You are giving the IRS plenty of time to review your return, verify your EITC and ACTC eligibility, and W2 authenticity, which is required before your return is processed. Additionally, filing with a tax professional who e-files is safe and secure and will also save you time.

Tax Credits, Deductions, and Getting Your Biggest Refund

One of the first elements to getting your biggest refund is making sure you don’t miss any tax credits or deductions you deserve. If your circumstances have changed from last year, there may be a number of new credits or tax deductions available to you. Because you may not know that you’re eligible, a Tax Pro can help you make sure you don’t leave any money on the table. Visit our Tax Refund Calculator to get your estimate.

Life Changes and Your Tax Refund

Tax credits and deductions are often connected to major life circumstances, so they may change from year to year based on your personal situation. For example, getting married, having a baby, or retiring could all have an impact on your taxes. Don’t miss out on some of these commonly overlooked areas.

The Fast Way to Get Your Tax Refund

There are a number of ways to get money early. Filing as early as possible will give you a better chance of being in the first round of returns processed by the IRS. Electronic or e-filing gets your return to the IRS quicker than mailing a paper return. The sooner they receive your return, the sooner they can begin processing. Choosing to have your refund directly deposited into your bank account instead of receiving a check in the mail is also faster. Another way to get your refund early is to choose to load it onto a prepaid card. Your refund will be available up to two days faster than standard direct deposit. Those two days can mean the difference between getting your refund on a Friday or waiting until Tuesday of the following week. It makes a big difference for most of our hard-working clients.

Starting your tax season early

Most taxpayers count on getting a refund as soon as possible, but sometimes, that is not quick enough. If you rely on your refund to pay bills you may qualify for tax time loans. Book an appointment with Heather’s Bookkeeping and Tax Services to learn more. We are open and ready to help with your tax needs for 2021.