2020 brings a new tax year and, as usual, a new year also brings changes in federal tax law. Some cases deduction amounts remain unchanged for 2019, such as medical and dental expenses, state and local sales tax, and the percentage limit for charitable cash donations made to public charities. However, retirement savings limits, standard deductions, and income thresholds for long-term capital gains have increased.
Here is a summary of three noteworthy changes taking place in 2020.
*In 2020 the required minimum distribution age for retirement is 72 years old. In 2019, the age the required minimum distribution age for retirement was 70.5 years old. However, any taxpayer who inherits a retirement plan must now withdraw the money in 10 years, which may place them in a higher tax bracket.
But there is good news as taxpayers may now contribute $500 more to a 401(k) as this amount increases from $19,000 in 2019 to $19,500 in 2020. Taxpayers do not pay any taxes while the money is in their accounts, but they will pay income taxes when they withdraw these funds.
*The standard deduction is up to $200 for individuals and $400 for married folks filing jointly. This standard deduction rose to $24,800 for the tax year 2020, up to $400 from 2019.
*Income thresholds for long-term capital gains rates also are increased to the following for 2020:
· 0% for single and married filing separately income up to $40,000 (from $39,375 in 2019); up to $80,000 for married filing jointly; and up to $53,600 for those filing as head of household.
· 15% for single income $40,001 to $441,450; $80,001 to $496,600 for married filing jointly; $40,001 to $248,300 for married filing separately; and $53,601 to $469,050 for those filing as head of household.
· 20% for single income exceeding $441,450; exceeding $496,600 for married filing jointly; exceeding $248,300 for married filing separately; and exceeding $469,050 for those filing as head of household.
Any taxpayer who has any questions about the 2020 changes in federal tax law and how they affect them, can call the tax professionals at The Gartzman Law Firm, where an experienced tax attorney can provide answers. Call The Gartzman Law Firm at (770) 939-7710.