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Tax Changes 2020

01
ACA Individual Mandate Penalty is imposed by States
  • No federal penalty, but some states have implemented their own individual mandates and associated penalties. (for example, in California, individuals without healthcare coverage for the year 2020 will have to pay $695 per person or 2.5% of Household Income.
02
New Credits
  • Economic Impact Payment- If a taxpayer didn't receive the full amount of the Economic Impact Payment for which they were eligible, they may be able to claim the Recovery Rebate Credit when they file in 2021
  • Taxpayers who don't itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations
  • The FFCRA provides businesses with tax credits to cover certain costs of providing employees with required paid sick leave and expanded family and medical leave for reasons related to COVID-19, from April 1, 2020, through December 31, 2020
  • Coronavirus-related distributions from eligible retirement plans
    • The 10% additional tax on early distributions does not apply to any coronavirus-related distributions.
    • You may repay all or part of the amount of a coronavirus-related distribution to an eligible retirement plan, within three years after the date that the distribution was receive.
    • You can elect to distribute tax over a three-year period.
03
Foreign Earned Income Exclusion
  • The foreign earned income exclusion increases to $107,600
04
Alternative Minimum
  • Exemption from the alternative minimum tax got an inflation boost in 2020 to 72,900 with a phase out at $518,400 ($113,400 for married couples filing jointly for whom the exemption begins to phase out at $1,036,800)
05
Standard Deduction Increased
  • Singles and Married filing Separately to $12,400
  • Joint filers to $24,800
  • Head of Household to $18,650
06
The gross income limitation for a qualified relative is $4,300
(does not apply if full-time students under the age of 24)
07
Contributions to Retirement Accounts Increase
  • Base contribution for 401 (k) 403(b): $19,500
  • Catch-up contribution (employees age 50 or older):$26,000
  • IRA Limit: $6,000
  • Catch-up contribution limit (Taxpayers age 50 and older): $7000
  • 401 (a) Limit: $56,000
Higher HSA contributions:
  • Self-only coverage: $3,550
  • Family coverage: $7,100
08
Tax Filing requirements
Generally, you must file a return if your gross income from worldwide sources is at least the amount shown for your filing status as follows:
  • Single $12,400
    • Age 65and older: $14,050
  • Married filing Jointly: $24,800
    • One spouse is 65 and older: $26,100
    • Both spouses 65 and older: $27,400
  • Married Filing Separately: $5
  • Head of Household: $18,650
    • Age 65 and older: $20,300
  • Qualifying Widower: $24,800
    • 65 and older: $26,100
  • Independent Contractors
    • Net earnings from self-employment of at least $400

Note: Students under age 24 years of age, can file taxes completely independent, or as a dependent by someone else.

  • Parents or guardians can still claim adult children as a dependent to benefit from educational credits. I.e. without a Bachelor’s degree, you can claim the following: your tuition, textbooks, supplies, hardware, and software. (Master’s degree you can only claim Tuition)
    • If you have earned income under $4,300 (exact amount varies yearly) you may qualify to be claimed as dependent by someone else.
    • If you are a dependent of another taxpayer you might still need to file. Check with your eTax Professional.
    • If you are a U.S. citizen or resident alien living or traveling outside the United States, you generally are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States.
09
Dependent Tax Filing requirements:
Single 65+
  • Unearned income of: $2,750 ($4,400 if 65 or older and blind)
  • Earned income $14,050 ($15,700 if 65 or older and blind).
  • Gross income was more than the larger of
    • $2,750 ($4,400 if 65 or older and blind)
    • Earned earned income (up to $12,050) plus $2,000 ($3,650 if 65 or older and blind
Single and under 65
  • Unearned income of: $1,100
  • Earned income $12,400
  • Gross income was more than the larger of
    • $$1,100 or
    • Earned income plus (up to $12,050) plus $350
Married 65+
  • Unearned income was over $2,400 ($3,700 if 65 or older and blind).
  • Earned income was over $13,700 ($15,000 if 65 or older and blind).
  • Gross income was at least $5 and your spouse files a separate return and itemizes deductions.
  • Gross income was more than the larger of
    • $2,400 ($3,700 if 65 or older and blind), or
    • Earned income (up to $12,050) plus $1,650 ($2,950 if 65 or older and blind).
Married and under 65
  • Unearned income was over $1,100
  • Earned income was over $12,400
  • Gross income was at least $5 and your spouse files a separate return and itemizes deductions
  • Gross income was more than the larger of
    • $1,100, or
    • Earned income (up to $12,050) plus $350.
You must file a return if any of the seven conditions below apply for 2020.
  • Owe any special taxes, including any of the following.
    • Alternative minimum tax
    • Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. But if you are filing a return only because you owe this tax, you can file Form 5329 by itself
    • Household employment taxes. But if you are filing a return only because you owe this tax, you can file Schedule H by itself
    • Social security and Medicare tax on tips you didn't report to your employer or on wages you received from an employer who didn't withhold these taxes
    • Write-in taxes, including uncollected social security and Medicare or RRTA tax on tips you reported to your employer or on group-term life insurance and additional taxes on health savings accounts. See the instructions for Schedule 2, line 8
    • Recapture taxes. See the instructions for line 16 and Schedule 2, lines 7b and 8.
  • You (or your spouse, if filing jointly) received health savings account, Archer MSA, or Medicare Advantage MSA distributions
  • You had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes
  • Advance payments of the premium tax credit were made for you, your spouse, or a dependent who enrolled in coverage through the Marketplace. You or whoever enrolled you should have received Form(s) 1095-A showing the amount of the advance payments
  • Advance payments of the health coverage tax credit were made for you, your spouse, or a dependent. You or whoever enrolled you should have received Form(s) 1099-H showing the amount of the advance payments
  • You are required to include amounts in income under section 965 or you have a net tax liability under section 965 that you are paying in installments under section 965(h) or deferred by making an election under section 965(i).

2020 Income Tax Brackets

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2020 Federal Income Tax Brackets
Tax Rate Single Married, filing jointly Married, filing separately Head of Household
10% $0 to $9,875 $0 to $19,750 0 to $9,875 $0 to $14,100
12% $9,876 to $40,125 $19,751 to $80,250 $9,876 to $40,125 $14,101 to $53,700
22% $40,126 to $85,525 $80,251 to $172,750 $40,126 to $85,525 $53,701 to $85,500
24% $85,526 to $163,300 $172,751 to $326,600 $85,526 to $163,300 $85,501 to $163,300
32% $163,301 to $207,350 $326,601 to $414,700 $163,301 to $207,350 $163,301 to $207,350
35% $207,351 to $523,600 $414,701 to $622,050 $207,351 to $311,025 $207,351 to $518,400
37% $518,401 or more $622,051 or more $311,026 or more $518,401 or more