November 7 2019

IRS announces inflation adjustments for 2020 – Part II

Source: IBFD Tax Research Platform News

On 6 November 2019, the US Internal Revenue Service (IRS) issued Revenue Procedure 2019-44 with inflation adjustments to tax allowances and other items for 2020. The IRS also issued a related News Release (IR-2019-180) dated 6 November 2019.

The IRS will make these adjustments with effect from 1 January 2020. These adjustments are required to be made each year by the applicable provisions of the US Internal Revenue Code (IRC).

The main adjustments announced by the IRS in Revenue Procedure 2019-44 are set forth below.

Standard deduction amounts

The year 2020 standard deduction amounts are:

Filing status Standard deduction (USD)
married individuals filing joint returns 24,800
heads of households 18,650
unmarried individuals 12,400
married individuals filing separate returns 12,400
dependent claimed on another taxpayer's return lesser of (1) USD 12,400; or (2) greater of (i) USD 1,100 or (ii) sum of dependent's earned income plus USD 350

Overall limitation on itemized deductions

For 2020, the overall limitation on itemized deductions does not apply.

Personal exemption amount

The year 2020 amount for each personal exemption is USD 0.

Expatriation to avoid tax

The year 2020 average annual net income tax threshold at which US citizens and US long-term residents will be deemed to have expatriated from the United States for tax avoidance purposes will be USD 171,000. The US expatriation provisions of IRC section 877A will apply if the average annual net income tax for the five preceding taxable years exceeds this amount or if the individual has a net worth in excess of USD 2 million or fails to meet certain certification requirements.

The year 2020 exclusion amount that will apply in computing the net gain subject to taxation on a mark-to-market basis for property owned on the date of expatriation will be USD 737,000.

Foreign earned income exclusion

The year 2020 annual limitation under IRC section 911(b)(2) for the foreign earned income exclusion of qualified US citizens and residents working abroad will be USD 107,600.

Unified credit against estate and gift tax

The 2020 unified credit against estate and gift tax for eligible taxpayers under IRC section 2010 is equal to an estate and gift tax exclusion amount of USD 11,580,000.

Annual exclusions for gifts

The year 2020 limitation on gifts that are not included in the total amount of taxable gifts under IRC section 2503 (other than gifts of future interests in property) will be USD 15,000.

The year 2020 limitation on gifts that may be made to a spouse who is not a citizen of the United States (other than gifts of future interests in property) will be USD 157,000. Gifts up to this amount will not be treated as taxable gifts under IRC section 2503(b) and IRC section 2523(i).

Reporting large gifts from foreign persons

The year 2020 threshold at which US persons who receive gifts from foreign persons will be required to file an information return with the IRS under IRC section 6039F will be USD 16,649.