Here’s a breakdown of the new income tax changes. InvestInYou (In partnership with acorns.)
The IRS also bumped your standard deduction for the 2020 tax year, which could reduce your taxable income.
The current standard deduction is $12,400 for singles, up from $12,200 in the prior year, and $24,800 for married joint filers, up from $24,400 in 2019.If you've resolved to save a few extra dollars in your retirement account at work, the IRS has raised the employee contribution limit for 401, 403 and most 457 plans to $19,500, up from $19,000 in 2019.
If you're age 50 or older, you can kick in an additional $6,500. That's also a bump up from $6,000 in 2019., whether traditional or Roth, is still at $6,000, plus another $1,000 for savers 50 and over. One caveat: The IRS limits high-income earners' ability to make direct contributions to Roth IRAs — accounts in which you can save after-tax dollars, have the money grow tax-free and use it in retirement free of taxes.These accounts allow you to put away pretax or tax-deductible money and have it grow free of taxes. You can take a tax-free withdrawal to cover qualified health expenses.
This year, you can save up to $3,550 if you're an individual with self-only health coverage. That's up from $3,500 in 2019. Account holders with family plans can save up to $7,100 in this account, up from $7,000 in 2019.
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