TAX FACTS: 2020 & Beyond

Standard Deduction: Married filing Joint & Qualifying Widow (er) $24,800.00, Head of Household $18,650.00, Single & Married Filing Separately $12,400.00.

Personal Exemption – has been eliminated.

Child Tax Credit: has been doubled to $2,000 per dependent child beginning in 2018 and is available to be claimed for all your qualified children under age 17 at the end of the year with a $500 for those dependents age 17 and older.

AMT Exemption amount: $113,400.00 joint, $72,900.00 single or head of household, $56,700.00 married filing separately.

Minimum wage effective 01/01/2020: https://www2.illinois.gov/idol/Laws-Rules/FLS/Pages/minimum-wage-rates-by-year.aspx

Who needs to file a tax return: https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return

Kiddie Tax: In 2018, under the new Tax Cuts and Jobs Act (TCJA) the kiddie tax will be based on the much more onerous tax rates for trusts, instead of the tax rates of the child’s parents on unearned income over $2,100 like it was under the old (pre-TCJA) rules. The following table provides an overview:

2020 Trust Tax Brackets and Rates on Ordinary Income	%
$0 to $2,600	10
$2,601 to $9,450	24
$9,451 to $12,950	35
over $12,950	37

For 2020, the kiddie tax calculation is restored to the method used prior to the TCJA (Tax Cuts & Jobs Act). https://www.journalofaccountancy.com/issues/2020/jul/kiddie-tax-rules-restored.html

Education credit: American Opportunity Tax Credit of $2,500 (100% of the first $2,000 of qualified expenses and 25% of the next $2,000.00) per student during the first 4 years enrolled at least half time in eligible higher education, subject to limitation due to adjusted gross income (begins to phase out at for individuals with income exceeding $80,000 and for married couples with income exceeding $160,000). After 4 years, the Lifetime Learning Credit is available of 20% of tuition up to a $2,000 credit on tuition of $10,000.

Student Loan Interest Deduction: A maximum deduction of $2,500 that phases out for individuals with incomes (MAGI) between $70,000 and $85,000 and phases out for married couples with AGI’s between $140,000 and $170,000).

Mileage Deductions

Mileage	Per Mile
Business	$0.56 in 2021 ($0.575 for 2020)
Charity	$0.14 (does not change, set by statute)
Medical	$0.16 in 2021
Moving	$0.16 in 2021

IRA Deduction: Follow this link to see the latest from the IRS:

https://www.irs.gov/retirement-plans/ira-deduction-limits

HSA Deduction: Single maximum is $3,550.00, family maximum $7,100.00 with $1,000.00 catch-up for 55 and older.

401(k) Contribution Limits: $19,500.00 Catch-up limit is $6,500.00 for a total possible of $26,000

FICA Limit: $137,700 for 2020, $132,900 for 2019

Section 179: $1,040,000.00, No reduction in this deduction until capital purchases exceed $2,590,000.00 of property investment on new or used equipment.

Bonus depreciation: for either new or used equipment; a deduction of 100% for equipment purchases made between September 28, 2017 and December 31, 2022.

IRA Required Minmum Distribution (RMD): begins at age 70 ½ (for those born June 30, 1949 and earlier) and age 72 for those born July 1, 1949 and later, see IRS FAQ’s at following link:

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions

NOTE: The RMD requirement was suspended for 2020.

Annual Gift Tax Exclusion: $15,000.00; Federal Estate/Gift Tax Unified Exclusion: $11,400,000.00 for 2020. For Illinois, the exclusion is still $4,000,000.00 with a graduated tax rate for the amount of estates in excess of $4,000,000.00.

For 2020, FICA taxes are required to be withheld from employee pay at a rate of 6.2% of the first $137,700 and 1.45% for unlimited pay for medicare. An additional medicare tax of 0.9% is required to be withheld from that portion of payroll exceeding $200,000 in a calendar year for those filing as single, head of household and qualifying widow(er) with qualifying child and $250,000 for those filing as married filing jointly, .