On this #FundMeFriday, I want to cover some important IRS tax changes for 2020 that are just a few weeks away from being implemented. With only a few weeks left in 2019, it is an important time period to start adjusting your finances as needed and I picked out a few important changes that will have an effect and that will be of interest to most people. Before I get into them, I am going to ask that standard Friday question and that question is, did you pay yourself today? You are going to get sick of me asking you this question but my hope is that if I mention it enough times, it will sink in and you will begin to pay yourself every week before you pay anything else. It is all about growing your savings so please make sure you pay yourself first.
One of the main changes that is of interest to most people is the change to the standard deduction. If you are single or married filing separately, your standard deduction rises to $12,400.00. If you are married filing a joint tax return, your standard deduction increases to $24,800.00. Finally, if you are head of household, your standard deduction rises to $18,650.00. This deduction is important because it reduces your taxable income and with all the tax changes that were made, many people cannot itemize their income tax returns anymore so this number will play a major role in your budget computations.
This next line item was something that people were hoping would come back but according to the IRS, the personal exemption which was a provision of the Tax Cuts and Jobs Act, I am sorry to say stays at 0.00 for tax year 2020 as it was in 2019. Sorry folks but you cannot look forward to this deduction and it looks like you may have to get used to this deduction missing in the forseeable future.
Now I personally have a chunk of client’s who look forward to this next line item and that is the Earned Income Credit. The credit has changed as follows, the maximum amount allowed in 2020 has increased to $6,660.00 for qualifying taxpayers who have three or more qualifying children.
Finally, many people ask about the annual exclusion for gifts. This gift is a way to transfer money without having any tax issues provided you follow the mandated exclusion. As for 2020, the annual exclusion for gifts remains the same as 2019 and that amount is $15,000.00. Therefore, I encourage all who are going to take advantage of this exclusion to make sure that you any individual that you gift money to does not exceed $15,000.00 in the tax year.
I hope that this information is useful and as always, if you have any further questions or comments on this matter, please feel free to contact me via email or just leave a comment and I will try and answer any question that you may have.
Today I have a great choice for your reading enjoyment. The book is called The Total Money Makeover which is a New York Times bestseller. Once you read this book, you will be able to take control of your finances. Go borrow a copy from your local library or from a friend as soon as you can. If neither option is available to you, I am attaching a link so that you can get it from Amazon. The link is>> https://amzn.to/3771uQO
If you choose to shop in Amazon, I would greatly appreciate it if you could use the link I have provided. As an Amazon Affiliate, it is possible I can earn a bonus and therefore continue to provide continued content we all enjoy. Thank you in advance!
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