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2020 IRS Inflation Adjustment Amounts

01/02/2020

2020 IRS Inflation Adjustment Amounts

~ Author - Janice Hogan, Deluzio & Company, Staff Accountant II ~

2019 is quickly approaching the year end. The IRS has posted 2020 inflation adjustment amounts as of November 6, 2019. Some of the common updates announced include the standard deduction, marginal rates, gift exclusion, and adjusted gross income amounts for Lifetime Learning Credit. 

What are the standard deductions for 2020?

  • Standard Deduction - An individual typically has the choice of choosing the standard deduction or itemized deductions. The amount includes the sum of the basic standard deduction based on filing status, plus an additional standard deduction if the individual age is 65 or older, or blind. The standard deduction is limited for a taxpayer that may be claimed as a dependent. 

    The basic standard deduction by the individual filing status for 2020 inflation changes include:

    Single or Married filing Separately $12,400 Increased $200 from prior year
    Head of Household $18,650 Increased $350 from prior year
    Married filing Jointly & Surviving Spouse $24,800 Increased $400 from prior year


    What are the marginal tax rates for 2020?

    • Marginal Rates - Progressive taxation as income earnings rise taxation increases categorizing marginal tax rates. For example, a taxpayer filing single has income earned at $10,000 for 2020. $9,875 is taxed at 10% and $125.00 is taxed at 12% disregarding any standard deduction or itemized deduction option.

    Tax Rate Single Unmarried Individuals Married Filing Separately Head of Household Married Filing Jointly & Surviving Spouse
    10% Incomes at $9,875 or less Incomes at $9,875 or less Incomes at $14,100 or less Incomes at $19,750 or less
    12% Incomes over $9,875 Incomes over $9,875 Incomes over $14,100 Incomes over $19,750
    22% Incomes over $40,125 Incomes over $40,125 Incomes over $53,700 Incomes over $80,250
    24% Incomes over $85,525 Incomes over $85,525 Incomes over $85,500 Incomes over $171,050
    32% Incomes over $163,300 Incomes over $163,300 Incomes over $163,300 Incomes over $326,600
    35% Incomes over $207,350 Incomes over $207,350 Incomes over $207,350 Incomes over $414,700
    37% Incomes over $518,400 Incomes over $311,025 Incomes over $518,400 Incomes over $622,050

    What is the beginning phaseout for the 2020 Lifetime Learning Credit?

    • The Lifetime Learning Credit maybe available to a taxpayer paying for qualified education expenses. The credit may be up to $2,000 per taxpayer. There are eligibility requirements. In addition, the credit cannot be used along with the American Opportunity Tax Credit. The adjusted gross income beginning phase out amount used by joint filers has increased to $118,000 for 2020. 

    What is the exclusion amount for estates of decedents who die in 2020?

    • Estates of decedents who die during 2020 have a basic exclusion amount of $11,580,000.00 for estates of decedents who died in 2020.

    What is the annual exclusion amount for gifts during 2020?

    • Gift Tax – There are many IRS factors involved including exclusions, deductions, and exceptions with gift tax. The following items are additional areas necessary to review when giving a gift.
      • Lifetime exclusion amount
      • Annual exclusion amount
      • Married donor requirements
      • Gift tax deductions

    In summary, the annual exclusion for gifts is the same as 2019 at $15,000 (single) or $30,000 (combined married filing joint meeting all three requirements).

    Regardless of the tax year, Deluzio & Company, LLP’s knowledgeable team is available to serve any necessary tax situations. Please contact our office for an appointment today.