On Nov. 6, 2019, the IRS released Rev. Proc. 2019-44 which sets forth inflation adjustments for taxable years beginning in 2020. Some of the key adjustments are presented below:
Tax rate tables:
Married individuals filing joint returns and surviving spouses
If taxable income is: |
The tax is: |
Not over $19,750 |
10% of the taxable income |
Over $19,750 but not over $80,250 |
$1,975 plus 12% of the excess over $19,750 |
Over $80,250 but not over $171,050 |
$9,235 plus 22% of the excess over $80,250 |
Over $171,050 but not over $326,600 |
$29,211 plus 24% of the excess over $171,050 |
Over $326,600 but not over $414,700 |
$66,543 plus 32% of the excess over $326,600 |
Over $414,700 but not over $622,050 |
$94,735 plus 35% of the excess over $414,700 |
Over $622,050 |
$167,307.50 plus 37% of the excess over $622,050 |
Unmarried individuals (other than heads of households and surviving spouses)
If taxable income is: |
The tax is: |
Not over $9,875 |
10% of the taxable income |
Over $9,875 but not over $40,125 |
$987.50 plus 12% of the excess over $9,875 |
Over $40,125 but not over $85,525 |
$4,617.50 plus 22% of the excess over $40,125 |
Over $85,525 but not over $163,300 |
$14,605.50 plus 24% of the excess over $85,525 |
Over $163,300 but not over $207,350 |
$33,271.50 plus 32% of the excess over $163,300 |
Over $207,350 but not over $518,400 |
$47,367.50 plus 35% of the excess over $207,350 |
Over $518,400 |
$156,235 plus 37% of the excess over $518,400 |
For heads of households
If taxable income is: |
The tax is: |
Not over $14,100 |
10% of the taxable income |
Over $14,100 but not over $53,700 |
$1,410 plus 12% of the excess over $14,100 |
Over $53,700 but not over $85,500 |
$6,162 plus 22% of the excess over $53,700 |
Over $85,500 but not over $163,300 |
$13,158 plus 24% of the excess over $85,500 |
Over $163,300 but not over $207,350 |
$31,830 plus 32% of the excess over $163,300 |
Over $207,350 but not over $518,400 |
$45,926 plus 35% of the excess over $207,350 |
Over $518,400 |
$154,793.50 plus 37% of the excess over $518,400 |
Married individuals filing separate returns
If taxable income is: |
The tax is: |
Not over $9,875 |
10% of the taxable income |
Over $9,875 but not over $40,125 |
$987.50 plus 12% of the excess over $9,875 |
Over $40,125 but not over $85,525 |
$4,617.50 plus 22% of the excess over $40,125 |
Over $85,525 but not over $163,300 |
$14,605.50 plus 24% of the excess over $85,525 |
Over $163,300 but not over $207,350 |
$33,271.50 plus 32% of the excess over $163,300 |
Over $207,350 but not over $311,025 |
$47,367.50 plus 35% of the excess over $207,350 |
Over $311,025 |
$83,653.75 plus 37% of the excess over $311,025 |
Estates and trusts
If taxable income is: |
The tax is: |
Not over $2,600 |
10% of the taxable income |
Over $2,600 but not over $9,450 |
$260 plus 24% of the excess over $2,600 |
Over $9,450 but not over $12,950 |
$1,904 plus 35% of the excess over $9,450 |
Over $12,950 |
$3,129 plus 37% of the excess over $12,950 |
Standard deduction:
Filing status |
Standard deduction |
Married Individuals Filing Joint Returns and Surviving Spouses |
$24,8001 |
Heads of Households |
$18,6502 |
Unmarried Individuals (other than Surviving Spouses and Heads of Households) |
$12,4002 |
Married Individuals Filing Separate |
$12,4001 |
1 Additional standard deduction for the aged or blind is $1,300
2 Additional standard deduction for the aged or blind is $1,650
Alternative minimum tax exemption:
Filing status |
Exemption |
Joint returns or surviving spouses |
$113,400 |
Unmarried individuals (other than surviving spouses) |
$72,900 |
Married individuals filing separate returns |
$56,700 |
Estates and trusts |
$25,400 |
Maximum capital gains rates:
Rate |
Joint or surviving spouse |
Married filing separate |
Head of household |
Unmarried individuals |
Estates and trusts |
0% |
Not over $80,000 |
Not over $40,000 |
Not over $53,600 |
Not over $40,000 |
Not over $2,600 |
15% |
Over $80,000 but not over $496,600 |
Over $40,000 but not over $248,300 |
Over $53,600 but not over $469,050 |
Over $40,000 but not over $441,450 |
Over $2,600 but not over $13,150 |
20% |
Over $496,600 |
Over $248,300 |
Over $469,050 |
Over $441,450 |
Over $13,150 |
Estate, gift and generation-skipping (GST) tax:
The annual gift and GST tax exclusion remains unchanged from 2019 at $15,000 per donee.
The estate, gift and GST exemptions for 2020 are increased to $11,580,000.
Action Items:
The additional $180,000 estate tax exemption provides an immediate opportunity to transfer wealth or repair any prior estate, gift or generation skipping transfer planning that has not gone as planned, but keep in mind the higher exemption sunsets at the end of 2025.
A more proximate threat to the increased exemption is the current Democratic candidates’ proposals. Their current positions surrounding death taxes are taking shape by increasing the rate, changing to a progressive death tax system, and decreasing the estate tax exemption.
Now is a good time to revisit current estate plans and work with the estate planning team to make sure flexibility and the effective use of the exemption is still taking place and is consistent with the goals. While additional gifting may not be the answer, now is a good time to reassess the trajectory of the estate plan and make any necessary course corrections.
