2020 Limitations and Rate Updates
Posted January 2020
The IRS has released a new Form W-4. With the Tax Cuts and Jobs Act, personal exemptions were discontinued. In response, the IRS has redesigned the Form W-4 to remove the allowances previously used in determining the appropriate withholding. Current employees do not have to file new Form W-4. Employers can continue using the previous one. All new employees must file with the new Form W-4.
The following payroll caps and limitations have been updated for 2020:
- Social Security wage base increases from $132,900 to $137,700
- 401(k) maximum deferral increases from $19,000 to $19,500
- HSA Contribution limits are increased from $3,500 to $3,550 for individual and from $7,000 to $7,100 per family
- FSA Contributions limits are increased from $2,700 to $2,750
Annual exclusion for gifts remains at $15,000 per recipient and taxpayer.
For tax year 2020, the top tax rate is 37% for individual single taxpayers with incomes more than $518,400 ($622,050 for married couples filing jointly). The other rates are:
- 35% for income greater than $207,350 ($414,700 for married filing joint);
- 32% for income greater than $163,300 ($326,600 for married filing joint);
- 24% for income greater than $85,525 ($171,050 for married filing joint);
- 22% for income greater than $40,125 ($80,250 for married filing joint);
- 12% for income greater than $9,875 ($19,750 for married filing joint).
- The lowest rate is 10% for incomes of single individuals with incomes of $9,875 or less ($19,750 for married filing joint).
2020 standard deductions have increased:
- Single & Married Filing Separate is $12,400
- Married Filing Joint is $24,800
- Head of Household is $18,650
The new mileage rates for 2020 are:
- Standard business use rate is 57.5¢ per mile
- Medical or moving rate is 17¢ per mile
- Charitable service rate is 14¢ per mile