Individuals

Federal Income Taxes

Going back 3 years the Tax Cuts and Jobs Act (TCJA), was the most significant set of changes to the U.S. tax code in 30 years, 2019 was a relatively stable year for tax changes. The large majority of the TCJA changes went into effect for the 2018 tax year (for returns filed in the spring of 2019). Remember that the TCJA legislation cut the top corporate tax rate to 21%, lowered the top marginal rate for individual tax payers to 37%, eliminated or scaled back several deductions, reduced taxes on business income earned by pass-through businesses, doubled the estate tax exemption, and enhanced immediate expensing of capital investments. Apart from these changes introduced in 2018, here are some 2020 highlights: There continue to be seven tax brackets in 2020, (a change from five was made in 2018). For individuals the top tax rate of 37% applies to those with taxable income of $518,400 in 2020, up from $510,301 in 2019, and $622,050 in 2020, up from $612,351 in 2019. Standard deduction for heads of household will increase $300 to $18,650 in 2020. Estates will have an exemption of $11,580,000 in 2020, up $220,000 from 2019.

In 2020, the maximum amount workers can contribute to their 401(k) rose $500 from 2019. The amount is $19,500 ($26,000 for workers over age 50 in 2020). IRA amounts rose $500 to $6,500 ($7,500 for those over age 50).

Since 2018, a metric known as the Chained CPI has been used instead of the CPI-U (consumer price index for all urban consumers). This is a relatively small change, however, because Chained CPI increases at a slower pace over time, it could have a big impact on the inflation adjustments to the tax code over decades.

Starting in 2019, the Affordable Care Act (ACA) individual mandate is repealed. There will no longer be a penalty payment on individual taxpayers who do not have health insurance. Given the changing nature of tax law and the complexity of our tax rules, planning is essential. We can help keep you informed of legislative action that may affect your tax situation and develop tax-efficient strategies for you.

Tax Rate Reduction

Your filing status determines the tax rate schedule you use, and your annual income determines your tax rate. It can be helpful to think of tax rates as layers: Zero tax is paid on the bottom layer, 10% on the next layer, and so forth. The highest layer your income reaches is known as your marginal rate.

2020 Tax Rates

10%, 12%, 22%, 24%, 32%, 35%, and 37%.

To determine your tax level, click on the appropriate filing status below: