The IRS has announced cost of living adjustments for more than 60 tax items for 2020 Act (Rev. Proc. 2019-44). All of the tax brackets have been affected, as well as the taxable income breakpoints for the favorable capital gains rate for long-term capital gains and qualified dividends. Here are some other key changes to note:
Standard deduction amounts. The standard deduction for joint filers rises to $24,800 (up from $24,400 in 2019). For single taxpayers and married individuals filing separately, the standard deduction in 2020 will be $12,400 (up from $12,200 in 2019), and for heads of households, the standard deduction will be $18,650 (up from $18,350 in 2019). The additional standard deduction amount for age or blindness remains at $1,300 for joint filers and $1,650 for unmarried individuals who are not surviving spouses.
AMT. The alternative minimum tax exemption amount for 2020 for singles, including heads of households, will be $72,900 (up from $71,700 in 2019) and will begin to phase out at $518,400 (up from $510,300 in 2019). For joint filers, the exemption amount will be $113,400 (up from $111,700 in 2019) and will begin to phase out at $1,036,800 (up from $1,020,600 in 2019).
Medical FSAs. The salary reduction contribution limit for 2020 to a medical flexible spending account (FSA) will be $2,750 (up by $50 over 2019).
Transportation fringe benefits. The tax-free monthly amount for parking, transit passes, and vanpooling in 2029 will be $270 (up from $265 in 2019).
Foreign earned income. The exclusion for foreign earned income from a job or self-employment abroad will be $107,600 in 2020 (up from $105,900 in 2019).
Estate and gift taxes. The annual gift tax exclusion remains unchanged at $15,000 per beneficiary. But the lifetime exemption amount for estates of decedents dying in 2020 will be $11,580,000 (up from $11,400,000 in 2019).