The standard deduction for married taxpayers who file joint tax returns will increase $400 to $24,800 in tax year 2020, while for single taxpayers and married individuals who file separately, the standard deduction will go up $200 to $12,400. For heads of households, the standard deduction will be $18,650 for tax year 2020, up $300. The personal exemption for tax year 2020 remains at 0, as it was for 2019, eliminated by the 2017 Tax Cuts and Jobs Act (TCJA).
The Qualified Business Income deduction (also called the QBI deduction, pass-through deduction, or section 199A deduction) was created by the 2017 Tax Cuts and Jobs Act (TCJA) and is in effect for tax years 2018 through 2025. With the QBI deduction, most self-employed taxpayers and small business owners can exclude up to 20% of their qualified business income from federal income tax (but not self-employment tax) whether they itemize or not. The deduction amount depends on the taxpayer's total taxable income, which includes wages, interest, capital gains (etc.) in addition to income generated by the business. Once the taxable income reaches or exceeds $157,500 ($315,000 if filing jointly), the type of business also comes into play. At incomes below that level, the deduction is 20% of either taxable income (minus capital gains and dividends) or the QBI, whichever is less. At higher income levels, the deduction is reduced or eliminated, depending on the nature of the business.
37 percent for incomes over $518,400 ($622,050 for married couples filing jointly).
35 percent for incomes over $207,350 ($414,700 for married couples filing jointly);
32 percent for incomes over $163,300 ($326,600 for married couples filing jointly);
24 percent for incomes over $85,525 ($171,050 for married couples filing jointly);
22 percent for incomes over $40,125 ($80,250 for married couples filing jointly);
12 percent for incomes over $9,875 ($19,750 for married couples filing jointly).
10 percent for incomes $9,875 or less ($19,750 for married couples filing jointly).
For 2020, like this year and last year, there’s no limitation on itemized deductions because that limitation was eliminated by the Tax Cuts and Jobs Act.
Short-term capital gains (on assets held for one year or less) are taxed at ordinary income tax rates. Long-term capital gains (on assets held for more than one year) are taxed at "preferential" rates, which are based on your (1) Filing Status and (2) Taxable Income.
Filing Status Your Income Tax Rate
Single $0 to $39,375 0%
Single $39,376 to $434,550 15%
Single $434,551 or more 20%
Married Jointly $0 to $78,750 0%
Married Jointly $78,751 to $488,850 15%
Married Jointly $488,851 or more 20%
Head of Household $0 to $52,750 0%
Head of Household $52,751 to $461,700 15%
Head of Household $461,701 or more 20%
Married Separately $0 to $39,375 0%
Married Separately $39,376 to $244,425 15%
Married Separately $244,426 or more 20%
For tax year 2020, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $118,000, up from $116,000 for tax year 2019. .