Estimated Tax Brackets for 2020

The last quarter of each year is traditionally reserved for last-minute tax moves, like charitable deductions, retirement contributions, capital investments, and other strategies to lower the taxable impact for the year. This year, in addition to the typical year-end tax saving tips, Naden/Lean will provide overviews of new strategies and tips to think about in light of tax reform. In this blog post, we discuss the updated 2020 tax brackets and deduction amounts.

Bookmark the Naden/Lean blog for future posts on year-end tax planning for individuals and businesses. Remember also that Tuesday, October 15, 2019 is the due date for automatic six-month extensions, except for certain members of the military or taxpayers who were affected by a federally recognized disaster.

Tax Brackets

First, know the updated tax brackets. Even though tax reform simplified and expanded the brackets, allowing more taxpayers to enjoy a lower tax rate, the change in withholding also negatively impacted millions. Second, the way that tax brackets, standard deduction amounts, and other items are adjusted has changed. Now, increases are tied to the chained Consumer Price Index. According to Forbes, this basically means that inflation amounts will seem smaller. The following tax brackets and deduction amounts are estimated from tax experts at Thomson Reuters – click here for their full analysis.

Here are some of the main tax brackets for 2020.

 

Single Filers

Taxable Income Tax Rate
≤ $9,875 10% of taxable income
$9,875 – $40,125 $987.50 + 12% of ≥$9,875
$40,125 – $85,525 $4,617.50 + 22% of ≥ $40,125
$85,525 – $163,300 $14,605.50 + 24% of ≥ $85,525
$163,300 – $207,350 $33,271.50 + 32% of ≥ $163,300
$207,350 – $518,400 $47,367.50 + 35% of ≥ $207,350
≥ $518,400 $156,235 + 37% of ≥ $518,400

 

Married Filing Jointly

Taxable Income Tax Rate
≤ $19,750 10% of taxable income
$19,750 – $80,250 $1,975 + 12% of ≥ $19,750
$80,250 – $171,050 $9,235 + 22% of ≥ $80,250
$171,050 – $326,600 $29,211 + 24% of ≥ $171,050
$326,600 – $414,700 $66,543 + 32% of ≥ $326,600
$414,700 – $622,050 $94,735 + 35% of ≥ $414,700
≥ $622,050 $167,307.50 + 37% of ≥ $622,050

 

Estates and Trusts

Taxable Income Tax Rate
≤ $2,600 10% of taxable income
$2,600 – $9,450 $260 + 24% of ≥ $2,600
$9,450 – $12,950 $1,904 + 35% of ≥ $9,450
≥ $12,950 $3,129 + 37% of ≥ $12,950

 

Capital Gains

Zero percent capital gains rate applies to adjusted net capital gain up to the below amounts:
Taxable Income Tax Rate
Joint returns and surviving spouses $80,000 (increase of $1,250)
Single filers and married filing separately $40,000 (increase of $625)
Head of Household $53,600 (increase of $850)
Estates and Trusts $2,650 (same as 2019)
15 percent capital gains rate applies to adjusted net capital gain over amounts subject to the 0% rate and up to the below amounts:
Joint returns and surviving spouses $496,600 (increase of $7,750)
Married filing separately $248,300 (increase of $3,875)
Single filers $2441,450 (increase of $6,900)
Head of Household $469,050 (increase of $7,350)
Estates and Trusts $13,150 (increase of $200)

 

Alternative Minimum Tax (AMT) Exemptions

Taxable Income Tax Rate
Joint returns or surviving spouses $113,400
Single filers $72,900
Married filing separate $56,700
Estates and Trusts $25,400
The below amounts will be used to determine AMT phaseouts in 2020:
Joint returns or surviving spouses $1,036,800
Single filers $518,400
Married filing separate $518,400
Estates and Trusts $84,800

 

The standard deductions for 2020 are expected to rise slightly to $24,800 for married filing jointly and $12,400 for single filers.

Tax Impacts of Life Events

Check in with your CPA to check tax withholding for 2019 as well as projected withholding for 2020. And remember that for any life events – like marriage, divorce, birth, adoption, death, college expenses, buying or selling a home, or starting or expanding a business – talk to your CPA as well. Often, big life changes also impact tax planning. Here are the tax credits and deductions to keep in mind for some of these important changes and tax situations.

Kids

There are two here, the kiddie tax and refundable child credit. The 2020 kiddie tax exemption of $2,200 is the same as 2019. Also, the same is the option to include a child’s income on the parent’s return, as long as the child’s income fell between $1,100 and $11,000. The child tax credit is refundable up to 15 percent of earned income above $2,500. There are additional exemption amounts for multiple kids; check with your CPA.

Taxpayers who adopt children can expect credits up to $14,300 with income phaseouts beginning at $214,520. The adoption exclusion amount is also $14,300 for 2020 with the same income phaseout.

Higher Education

The student loan interest deduction begins to phase out between $140,000 and $170,000 for joint filers and $70,000 to $85,000 for single filers. This is not changed from 2019. The Lifetime Learning Credit is available to taxpayers with income up to $118,000 (married filing jointly) or $59,000 (single), after which point the credit begins to phase out. Taxpayers who elect to redeem U.S. savings bonds to pay for higher education expenses can exclude the interest if their income does not exceed $123,550 (married) or $82,350 (single).

Keep reading the blog for ways to minimize your tax burden as we near the end of 2019. If you have questions about taxes for your specific situation, don’t hesitate to contact us here.