Changes That Will Affect Your 2020 Taxes

As Americans start filing their taxes for the 2019 year, there are new changes that will affect your taxes for 2020. What are the changes and what do you need to know? We break it down.

As Americans start filing their taxes for the 2019 year, there are new changes that will affect your taxes for 2020. What are the changes and what do you need to know? We break it down.

Taxable brackets and rates

From the IRS, new tax brackets in 2020 are as follows:

37% for single and MFS income exceeding $518,4000 ($622,050 for MFJ);

35% for single and MFS income exceeding $207,350 ($414,700 for MFJ);

32% for single and MFS income exceeding $163,300 ($326,600 for MFJ);

24% for single and MFS income exceeding $85,525 ($171,050 for MFJ);

22% for single and MFS income exceeding $40,125 ($80,250 for MFJ);

12% for single and MFS income exceeding $9,875 ($19,750 for MFJ); and

10% for single and MFS income below $9,875 ($19,750 for MFJ).

The top tax rate remains at 37%. The standard deduction for married Americans filing jointly is up $400 from 2019, at $24,800.

401(k)s, 403(b)s, Thrift Savings Plan, and other retirement savings changes

From the IRS, this year you’ll be able to set aside more money for your retirement account through work. The IRS raised the employee contribution by $500 for 2020, up from the $19,000 limit in 2019. If you’re 50 or older, you can play catch up with your retirement and save an additional $6,500, up from the 2019 limit of $6,000. Individual Retirement Accounts (IRAs) remains the same at a $6,000 limit (though those over 50 can save an additional $1,000).

Flexible Spending Account (FAS) and Health Savings Account (HSA)

Beginning in 2020, the limit for employee contributions to an FSA is $2750, this is up $50 from the 2019 limit.

Health Savings Accounts or HSAs are accounts that allow you to put away pre-tax money and allow it to grow. You can use this money to cover health expenses, like doctor visits, contact lenses, and other qualifying health expenses. Remember, HSAs allow you to roll over your balance from one year to the next, whereas FSAs should be used by the end of the year. “In 2020, you can save up to $3,550 if you’re an individual with self-only health coverage. That’s up from $3,500 in 2019. Account holders with family plans can save up to $7,100 in this account (up from $7,000 in 2019).”

A financial advisor can help you through tax season

A financial advisor will be familiar with tax changes, can help you avoid mistakes when it’s tax season, and will have advice if you have a tax bill you can’t pay. Consider finding an advisor today.

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