5 Ways that the Federal Income Taxes Will Be Different in 2020

5 Ways that the Federal Income Taxes Will Be Different in 2020

​1. No individual mandate penalty
Most of the tax code changes stemming from the Tax Cuts and Jobs Act of 2017 took effect in 2018. One exception is the change to the shared responsibility payment, which took effect in 2019.

The shared responsibility payment — commonly referred to as the individual mandate penalty — had applied to folks who were required to have health insurance under the Affordable Care Act but who didn’t get coverage and didn’t qualify for an exemption.

If you owed the penalty, it was due when you paid your taxes.

Starting with 2019, however, there is no longer a penalty. So, folks who didn’t have health insurance in 2019 will not owe the penalty when they file their taxes in 2020.

2. No alimony deduction
Elimination of the alimony deduction is another Tax Cuts and Jobs Act change that took effect for tax year 2019 rather than 2018. For divorce and separation agreements made or modified this year or thereafter, alimony payments will not be deductible, says IRS Publication 5307.

So, a spouse who got divorced this year and paid alimony in 2019 cannot write the payments off on a tax return in 2020. That also means that a spouse who got divorced in 2019 and received alimony this year cannot count the payments as income.

3. Higher Health Savings Accounts contribution limits
Health savings accounts are another type of tax-advantaged account for which the contribution limits generally increase as the years roll along.

HSAs are not strictly for retirement savings, although you can effectively use them as retirement accounts, as we explain in “3 Reasons to Get a Health Savings Account.”

The 2019 contribution limits for people who are eligible for an HSA and have the following types of high-deductible health insurance policies are:

Self-only coverage: $3,500 (up from $3,450 for 2018)
Family coverage: $7,000 (up from $6,900)

4. Higher standard deductions
Standard deductions are somewhat higher for tax year 2019 on account of inflation. The IRS reports that they are:

Married filing jointly: $24,400 (up $400 from last year)
Married filing separately: $12,200 (up $200)
Head of household: $18,350 (up $350)
Single: $12,200 (up $200)
The standard deduction reduces the amount of your income that’s subject to federal taxes. So, if a married couple filing a joint tax return are eligible for and choose to take the standard deduction on their 2019 return, they would not be taxed on the first $24,400 of their taxable income from 2019.

5. Higher income brackets
Income tax brackets are also somewhat higher for tax year 2019 than they were for 2018 on account of inflation.

The IRS reports that the tax rates and corresponding income brackets for 2019 are as follows for folks whose tax filing status is single:

37% tax rate: Applies to incomes of more than $510,300
35%: More than $204,100 but not more than $510,300
32%: More than $160,725 but not more than $204,100
24%: More than $84,200 but not more than $160,725
22%: More than $39,475 but not more than $84,200
12%: More than $9,700 but not more than $39,475
10%: $9,700 or less

2020 Tax Season Dates

2020 Tax Season Dates

2020 Tax Season Dates

Alright, it’s time bust out your calendars and circle some important dates so that you won’t make the mistake of waiting until the last minute to file your taxes.

While Tax Day isn’t until April, waiting until then is a recipe for disaster. Not only is waiting until April 15 more stressful than going Xmas shopping on Christmas Eve, but you’ll miss out on some of the benefits of filing your taxes early.

With that in mind, here are some important dates to keep in mind as tax season rolls around:

  • Late January 2020: The IRS hasn’t confirmed a specific date yet, but this will be the official start of tax season—the day the IRS begins accepting and processing your 2019 tax returns. So, if you have all your tax forms and information in order by then, you can get your taxes out of the way before the snow in your front yard melts.
  • January 31, 2020: You should have online access to your W-2 form—the form employees use to report their income—or have it delivered to you by your employer by this date. So, check your mailboxes! If you did freelance or contract work for a business or client, then you might get a 1099-MISC form that you’ll use to report your self-employment income. If you haven’t received your forms by the end of January, reach out to your company’s HR department to get that sorted out.
  • April 15, 2020: This is the dreaded “Tax Day”—the day your 2019 income tax return is due to Uncle Sam. It’s also the last day to request a six-month extension if you need more time to file your taxes. But an extension to file is not an extension to pay—you still need to pay the IRS what you owe in taxes to avoid paying a late penalty and getting charged interest on your unpaid taxes.
  • June 15, 2020: If you live overseas or you’re on military duty outside of the United States, your taxes are still due on April 15—but you’re given an automatic two-month extension to file your taxes (without needing to request one). However, if you file later than April 15, interest will be charged on the taxes you owe starting from April 15.
  • October 15, 2020: Got a six-month extension to file your 2019 taxes? This is the deadline to file those tax returns.

What if you’re self-employed and pay quarterly taxes (or estimated taxes) throughout the year? Here are the deadlines for your 2020 estimated taxes:

2020 Quarterly Tax Deadlines

First Payment April 15, 2020
Second Payment June 15, 2020
Third Payment September 15, 2020
Fourth Payment January 15, 2021
IRS Announces 2020 Mileage Rates

IRS Announces 2020 Mileage Rates

The Internal Revenue Service (IRS) issued the 2020 optional standard mileage rates used to calculate the deductible costs of operating an automobile (including vans, pickups and panel trucks) for business, charitable, medical or moving purposes.

Beginning January 1, 2020, the standard mileage rates are:

57.5 cents per mile driven for business use, down one half of a cent from the rate for 2019,
17 cents per mile driven for medical or moving purposes, down three cents from the rate for 2019, and
14 cents per mile driven in service of charitable organizations.
It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than five vehicles used simultaneously.