We’re only a few weeks into 2020, but it’s not too early to start thinking about tax season. To help you get organized and prepared for April 15th, Cross Accounting is taking a look at changes for 2020, what is staying the same from last year, and important dates to mark in your calendar.
Notable Changes From 2019
There are a number of important changes to take note of this year as it relates to your income, saving, spending, and health coverage.
- Income Tax Brackets. Your tax rate (the percentage of your income you pay in taxes) is based on your tax bracket. For 2019 taxes, the rates are staying the same, but the IRS has slightly adjusted the brackets to account for inflation.
- Tax Deductions. The standard deduction has increased to $12,4000 for single filers and $24,800 for married couples filing jointly. Your tax professional should compare both Standard and Itemized deduction numbers to evaluate the most beneficial option for the taxpayer.
- 401(k) Contributions. The IRS has raised the employee contribution limit to $19,500. If you are 50-years or older, you can add an additional $6,500 to that retirement plan.
- Health Savings Account. If you have self-only health coverage, you can save up to $3,550 in your HSA. Also, there is no longer a tax penalty for not having health insurance coverage.
- Estate Tax Exemption. The estate tax is a 40% federal tax you pay on inherited money and property. In 2020, a person can transfer up to $11.58 million without being subject to the estate tax (that’s up from $11.4 million in 2019).
Staying the Same in 2020
While there are multiple items that changed from the 2019 to 2020 tax season, there are several tax credits and deductions that are holding steady for the foreseeable future.
- Charitable Donations Deduction. If you itemize your deductions, you can still deduct as much as 60% of your income in qualified charitable donations.
- Child Care Tax Credit. The 2018 federal tax reform increased the child tax credit to $2,000 per qualified child and raised the income limits to $200,000 (individually) and $400,000 (jointly). That credit is the same for 2020.
- SALT Deduction. You can still deduct state and local income taxes, sales tax, and property taxes in 2020. But the limit is set at $10,000.
- Tax Credit for Blindness. The standard deduction for blind individuals aged 65 and older is still available in 2020.
Mark Your Calendar
There are a couple of dates you should be aware of in 2020, as it relates to your tax paperwork and when you need to submit your income taxes.
- January 31, 2020. Employers should have delivered their W-2 form to employees, either by mail or accessible online.
- April 15, 2020. Tax Day! This is the deadline for submitting your 2019 income tax return or the last day to request a six-month extension. (If you request a six-month extension, your filing new due date is October 15, 2020.)
- June 15, 2020. If you live outside the US or you’re on military duty outside of the US, you are given an automatic two-month extension to file your taxes.
- If you are self-employed and pay quarterly taxes or estimated taxes, your 2020 deadlines are April 15, 2020; June 15, 2020; September 15, 2020; and January 15, 2021.
Need Help With Your Income Tax Return?
Cross Accounting has been serving the financial best interests of metro Atlanta since 1997. We provide tax, accounting, and bookkeeping support to families, individuals, and businesses. You can trust our local accounting team to provide creative ideas and affordable solutions. Contact Cross Accounting today at (770) 293-7500 or via our website.