Every year, the Internal Revenue Service announces cost-of-living adjustments that affect contribution limits for retirement plans and various tax deduction, exclusion, exemption, and threshold amounts. Here are a few of the key adjustments for 2020.
Employer retirement plans
- Employees who participate in 401(k), 403(b), and most 457 plans can defer up to $19,500 in compensation in 2020 (up from $19,000 in 2019); age 50 and older can defer up to an additional $6,500 in 2020 (up from $6,000 in 2019).
- Employees participating in a SIMPLE retirement plan can defer up to $13,500 in 2020 (up from $13,000 in 2019), and employees age 50 and older can defer up to an additional $3,000 in 2020 (the same as in 2019).
IRAs
The combined annual limit on contributions to traditional and Roth IRAs is $6,000 in 2020 (the same as in 2019), with individuals age 50 and older able to contribute an additional $1,000. For individuals who are covered by a workplace retirement plan, the deduction for contributions to a traditional IRA phases out for the following modified adjusted gross income (MAGI) ranges:
|
2019 |
2020 |
| Single/head of household (HOH) |
$64,000 – $74,000 |
$65,000 – $75,000 |
| Married filing jointly (MFJ) |
$103,000 – $123,000 |
$104,000 – $124,000 |
| Married filing separately (MFS) |
$0 – $10,000 |
$0 – $10,000 |
Note: The 2020 phaseout range is $196,000 – $206,000 (up from $193,000 – $203,000 in 2019) when the individual making the IRA contribution is not covered by a workplace retirement plan but is filing jointly with a spouse who is covered.
The modified AGI phaseout ranges for individuals to make contributions to a Roth IRA are:
|
2018 |
2019 |
| Single/HOH |
$122,000 – $137,000 |
$124,000 – $139,000 |
| MFJ |
$193,000 – $203,000 |
$196,000 – $206,000 |
| MFS |
$0 – $10,000 |
$0 – $10,000 |
Estate and gift tax
- The annual gift tax exclusion for 2020 is $15,000, the same as in 2019.
- The gift and estate tax basic exclusion amount for 2020 is $11,580,000, up from $11,400,000 in 2019.
Standard deduction
|
2019 |
2020 |
| Single |
$12,200 |
$12,400 |
| HOH |
$18,350 |
$18,650 |
| MFJ |
$24,400 |
$24,800 |
| MFS |
$12,200 |
$12,400 |
Note: The additional standard deduction amount for the blind or aged (age 65 or older) in 2020 is $1,650 (the same as in 2019) for single/HOH or $1,300 (the same as in 2019) for all other filing statuses. Special rules apply if you can be claimed as a dependent by another taxpayer.
Alternative minimum tax (AMT)
|
2019 |
2020 |
| Maximum AMT exemption amount |
| Single/HOH |
$71,700 |
$72,900 |
| MFJ |
$111,700 |
$113,400 |
| MFS |
$55,850 |
$56,700 |
| Exemption phaseout threshold |
| Single/HOH |
$510,300 |
$518,400 |
| MFJ |
$1,020,600 |
$1,036,800 |
| MFS |
$510,300 |
$518,400 |
| 26% rate on AMTI* up to this amount, 28% rate on AMTI above this amount |
| MFS |
$97,400 |
$98,950 |
| All others |
$194,800 |
$197,900 |
| *Alternative minimum taxable income |
|
