It’s time for the U.S. Internal Revenue Service to make its annual inflation adjustments to a variety of tax rates and limits.
This includes higher estate and gift tax limits for 2020. In the coming year, individuals will be able to gift or exclude from federal estate taxes a total of $11.58 million, up from $11.4 million in 2019. The annual gift tax exclusion—the amount you can give to heirs each year without reporting a gift—remains at $15,000.
The IRS also raised the annual limit that can be contributed to a defined contribution (401(k) or similar) plan from $19,000 to $19,500. People 50 or older can make catch-up additional contributions of $6,500, up from 2019’s $6,000. The amount you can contribute to an Individual Retirement Account is unchanged at $6,000, with a $1,000 catchup limit for people 50 and older.
If an employer allows after-tax contributions, or if you’re self-employed, the overall defined contribution plan limit was raised from $56,000 to $57,000.
The IRS also changed the tax brackets for working Americans, raising slightly the thresholds for the 10%, 12%, 22%, 24%, 32%, 35% and 37% rates. It also raised the 2020 standard deduction to $12,400 for individuals and $24,800 for married people filing jointly.
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