Every new year brings new changes by the tax department. Thankfully this year all the changes are good. And will help you make money rather than lose it. Experts have shared four tax changes in 2020 that people should be aware of.
There is a higher stander of deduction. You can either take standard deduction as dictated by the IRS, or they can itemize their deductions in an attempt to take out more tax savings. But according to Los Angeles tax accountants, with higher deduction, itemizing seems to hold less benefits. Moreover it’s a complicated process.
IRS sets a new retirement contribution plan every year. This year however the limits for IRAs aren’t changing. That means those who save a 401(k) get an even greater opportunity to build wealth for their later years. Currently, the annual 401k limits are $19,500 for workers under 50 and $26,000 for those who are 50 or older. This shows a $500 jump for younger workers compared to 2019, and a $1,000 boost for those who are 50 or older.
Health savings account is a great way to save up some money for a rainy day when you need to pay hospital bills. In 2020, you can contribute up to $3,550 to an HSA if you have individual health coverage. For family health coverage, the limit doubles up to $7,100. And if you’re 55 or older, you get a $1,000 catch-up, similar to the catch-up you get in an IRA.
There is a higher income limit this year for Roth IRAs. Higher earners were barred from contributing to Roth IRAs. But this year, the income thresholds at the point where contributions phase out, have increased. Contributions don’t begin to phase out till the income limit reaches $124,000. So you can use this to your advantage.