Alright, we know it’s January. But here’s the thing — it’s never too early to start preparing to do your taxes. The more work you do now to educate yourself about the tax changes for 2020, the less work you’ll have to do down the road when April rolls around.
Everyone knows that the week leading up the tax deadline is always a frenzy of getting your documentation together. So why not save yourself the headache by slowly starting work on the process now? There’s no doubt that your future self will thank you greatly for it.
In this article, we’ll help you get started on that tax preparation process by teaching you everything you need to know about the tax changes that the IRS is introducing in 2020. Every year, the Internal Revenue Service makes minute changes to the tax codes. Staying abreast of these will help you avoid as much tax liability as possible, putting more hard-earned dollars back in your bank account.
Let’s get started!
First and foremost, there are now higher standard deduction limits. The standard deduction last year for single filers was $12,000. It has now increased by $400 to $12,400.
There’s good news for married couples as well. It rises up to $24,800 for couples, and for those who are heads of their households, the deduction is now $18,650. This means an extra few hundred dollars from your pay stubs that you’re not taxed on! (pro tip: if you’re on an employer, use www.paystubs.net to make taxes easy for your employees)
Speaking of things that you should start doing as early as possible, let’s start talking about retirement savings. You should already be actively contributing to your 401(k) so that you have as much laid away for when you retire as possible.
And in 2020, you can now contribute even more to your 401(k). There has been a $500 jump for workers under 50, to $19,500 per year. And for workers over 50, the limit has increased by a grand to $26,000.
Another way to save money for the future is in a health savings account (HSA). In 2020, you’ll be able to put a lot more money into your healthcare account, a total of $3,550 if you have individual coverage.
If you instead have a family coverage plan, then the limit is increased to $7,100.
If you’re a millionaire, then I have some good news for you! There has been an increase in how much you can gift over your lifetime or in the event of your passing and the distribution of your estate.
The tax exemption is now $11.58 million when it was $11.4 million last year. Just a short while ago, that figure was less than $6 million.
There you have it — armed with this info on all of the most crucial tax changes for 2020, you’re all ready to start preparing for this year’s hectic tax season. Make things less busy around the IRS deadline by starting to get your documentation together now. Make sure to take advantage of these tax breaks above.
For more financial advice, be sure to check out the rest of the website!
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