The Internal Revenue Service announced the federal tax brackets and the standard deduction amount for 2019 taxes that you’ll pay in 2020. Both the increases on tax brackets and the standard deduction increase is about 1.6%. So unless your income has increased, you are likely to face the same tax bill in 2020 as well.
The standard deduction increased by $200 from $12,200 to $12,400 in 2020 for single filers. This amount is doubled for joint filers. If you’re filing as head of household, the standard deduction is $18,650 for 2020. Here is a small table that shows the increase in the standard deduction.
|Single or Married Filing Separately||$12,200||$12,400|
|Married Filing Jointly or Qualified Widow(er)||$24,400||$24,800|
|Head of Household||$18,350||$18,650|
With this increase, it is expected that more taxpayers will claim the standard deduction rather than itemize.
Which one should you claim?
Same as any other year, you should never itemize if the total deductions don’t exceed the standard deduction amount. Just because you’re going to claim the standard deduction doesn’t mean that all the other deductions are not an option to you.
There are still a few deductions that you can claim if you’re eligible. These deductions are called above-the-line deductions. You can see our explanation of the above-the-line deductions, eligibility requirements, and amounts of each deduction from this article.
Another thing that doesn’t change any year is if you’re a homeowner living in a high real estate value area, your best bet is the itemize. In 2020, the deduction limit for mortgage interest is $750,000, the same as in 2019.
Popular itemized deductions in 2020
- Medical and Dental Expenses (over 10% of your AGI)
- Student Loan Interest (up to $2,500)
- Investment Interests
- Mortgage Interest (up to $750,000 or $1,000,000 if the house was bought before December 15, 2017)
- State and Local Income
- Personal Property or Sales Taxes (up to $10,000)
- Health Savings Account Contributions
- Charitable Contributions
Interested in itemizing deductions in 2020? Visit our dedicated post on itemized deductions explaining every major deductions where you can use to lower your taxable income.