The COVID-19 pandemic changed life in many ways in 2020 and 2021, including finances and the economy. Tax laws change all the time, but in 2020, there were changes that can impact how you file for taxes this tax season. Take a look below at some of the changes you should know about when filing your 2020 income tax.
Changes to know about when filing your 2020 income tax
- Income brackets have changed — The tax brackets have shifted only slightly, but it is important for you to know about these changes in case they affect your filing status. <INSERT CHART FROM https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2021>
- Standard deduction is higher — The Tax Cuts and Jobs Act (TCJA) of 2017 doubled the standard deduction you can claim. Standard deduction in 2020 increased by $200 to $400 depending on your filing status. This means that it is now $12,400 for single filers and $24,800 for married couples filing jointly.
- 401(k) limits increased — IRA contribution limits in 2020 are the same as they were in 2019, but 401(k) contributions rose to $19,500 (filers aged 50 or older can contribute an additional $6,500).
- HSA limits increased — The limits on the max contributions to your health savings account (HSA) increased slightly in 2020. The max for a single filer is $3,550 now and the max for married filers is $7,100. Filers aged 55 and older could contribute an additional $1,000 catch-up contribution.
- Child tax credit is available — Eligible parents may be able to claim a tax credit of up to $2,000 per child aged 16 and younger. Single filer households that earn less than $200,000 may be eligible as well as joint filer households that earn less than $400,000.
- Estate tax exemption increased — The estate tax exemption is indexed to shift with inflation rates. In 2020, it rose to $11.58 million. The annual gift exclusion limit remains the same at $15,000 per recipient.
Talk to a ProVise CFP® professional about planning for your 2020 income taxes
At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about planning for your income taxes? Contact ProVise today to schedule a complimentary consultation.