The Tax Cuts and Jobs Act of 2017 created massive changes. While the bulk of those changes started in 2018, there are a few tweaks and delayed changes that affect filing for taxes in 2020. Here are a few of the major changes, so you can be prepared before filing.

What Changes Should I Know About Before Filing My Taxes?

1. Increased Standard Deduction

The standard deduction, which lowers your tax burden, is higher for all taxpayers this year. Single filers saw an increase of $200, while heads of household are privy to a $300 increase of their standard deduction rates. For married couples filing jointly, the standard deduction was $400 more than in previous years.

2. Increased Contribution Limits on Retirement Accounts

The amount you’re allowed to contribute to a retirement account, such as an IRA or 401(k), have also gotten higher. For 401(k)s, the yearly contribution limit was raised to $19,000, while those contributing to an IRA are free to put as much as $6,000 into their accounts. 

3. No Penalty for Not Having Health Insurance

When the Affordable Care Act took effect, taxpayers without health coverage were penalized on their taxes. The individual mandate penalty, as it was known, was overturned by the Tax Cuts and Jobs Act of 2017. As a result, people without health insurance in 2019 are not obligated to pay a penalty when filing taxes this year. 

4. Changes to Income Brackets

How much money you make is a factor in your tax rate. This is how income brackets are established, and as you make more money, the tax rate also increases. In 2019, people who earned between $9,700 and $39,475 were taxed at a rate of 12%. At the other end of the spectrum, people who earned between $204,100 and $510,300 had a tax rate of 35%.

Understanding changes to the tax code can be challenging. That’s why taxpayers in Sparta, WI, look to Simplified Tax when they have questions or concerns about their filings. Thanks to more than three decades of experience, these accountants can address the most complex tax situations with ease. They also provide service to local businesses, including help with payroll and bookkeeping. Schedule a consultation today by calling (608) 269-2633.