Key changes: what you need to know about taxes in 2020
It is never too early to start saving for retirement and to cut your tax account. The IRS has adjusted inflation for a number of rates: from the amount that you can add to the 401 (k) pension plan, to individual income tax rates, writes CNBC.
Pay attention to your standard tax deduction for tax year 2020. The IRS increased it to $ 12 for those who are not married, compared to $ 400 the previous year.
The standard deduction for spouses will be $ 24, compared with $ 800 in 24.
The IRS raised the annual limit of employee contributions to the savings accounts of pension plans 401 (K), 403 (B) and most plans 457 to $ 19, compared to $ 500 in 19.
If you are 50 or more years old, you can additionally set aside another $ 6 (versus $ 500 in 6000).
The contribution limit for individual retirement accounts, whether traditional or Roth, remains stable at $ 6000, plus another $ 1000 for depositors aged 50 and over.
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One caveat: the IRS limits the ability of high-income individuals to make direct contributions to IRA Roth — accounts from which money can be used after retirement without paying taxes on them.
In 2020, if your adjusted gross income exceeds $ 124 for a single person and $ 000 for couples filing together, you won’t be able to make the full contribution directly to IRA Roth.
Instead, investors may consider using a strategy known as backdoor Roth when they deposit money into a traditional IRA and then transfer this contribution to Roth.
Opportunities to save on medical services
If you purchased a high deductible health insurance plan for 2020, then most likely you have access to a Health Savings Account (HSA).
Such accounts allow you to set aside tax-free money or money from deductions and accumulate them without paying taxes. You can use the funds from such accounts to cover the costs of qualified medical care.
In 2020, you can save up to $ 3 by purchasing a health insurance plan just for yourself. This is compared to $ 550 in 3500. Holders of family insurance plans can save up to $ 2019 on this account (compared to $ 7 in 100).
The HSA differs from the Flexible Spending Account (FSA) primarily in that you can carry the HSA balance from year to year. Money in FSA accounts must be used by the end of the planning year.
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The IRS has also increased the amount you can save through the FSA: it will be $ 2 in 750, compared to $ 2020 in 2.
Savings on gifts and property tax
Good news for the heirs of millionaires. The 2017 tax reform almost doubled the amount that individuals can donate throughout their lives or bequeath after death, avoiding paying federal property taxes and donations. The rate of such taxes is 40%.
Before the reform, without paying federal taxes for life, it was possible to donate or bequeath assets of up to $ 5,49 million per person. In 2020, the limit grew to $ 11,58 million per person, compared to $ 11,4 million in 2019.
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