To help with your tax planning, here's a summary of the federal income tax rates and other tax changes that took effect January 1, 2020. The income tax adjustments provided below will apply to the 1040 return you'll file in 2021 for the 2020 tax year.

Standard deduction

The 2020 standard deduction is:

• $12,400 for single filers and married persons filing separately
• $24,800 for married couples filing jointly
• $18,650 for heads of household

Taxpayers 65 or older or blind can take an extra standard deduction of $1,650 (single filers) or $2,600 (married couples filing jointly).

Tax rates

Your "marginal tax rate" is the highest tax rate you pay in any given year. It's what you pay on your last dollar of taxable income. For 2020, the marginal rates are:

• 10% for single filers with income of $9,875 or less ($19,750 for married couples filing jointly)
• 12% for single filers with income over $9,875 ($19,750 for married, filing jointly)
• 22% for single filers with income over $40,125 ($80,250 for married, filing jointly)
• 24% for single filers with income over $85,525 ($171,050 for married, filing jointly)
• 32% for single filers with income over $163,300 ($326,600 for married, filing jointly)
• 35% for single filers with income over $207,350 ($414,700 for married, filing jointly)
• 37% for single filers with income over $518,400 ($622,050 for married, filing jointly)

Employer-sponsored retirement savings plans

For 2020, the maximum pretax contribution you can make to a 401(k) or 403(b) plan or most 457 plans has increased by $500 to $19,500. For savers aged 50 or older by the end of 2020, the top pretax contribution is $19,500 plus a $6,500 catch-up amount, or a total of $26,000.

IRAs

IRA contributions are capped at $6,000 per individual, the same limit as last year. For persons aged 50 or older by year-end, the limit is $7,000, including a $1,000 "catch-up" amount. The limit that applies to you represents the total annual amount you're allowed to contribute to all your traditional and Roth IRAs combined.

As always, contributions to a Roth IRA are further limited for taxpayers with modified adjusted gross income (MAGI) above a threshold that gets adjusted annually for inflation. (Your MAGI is your total income plus certain tax deductions added back in.) Once your MAGI exceeds the threshold, your contribution limit gradually declines until, at a certain MAGI level, you're not eligible to contribute at all to a Roth IRA. For 2020, the contribution limit starts declining at $124,000 for single filers and $196,000 for married couples filing jointly.

Estate and gift tax

For 2020, the estate tax exemption is $11,580,000, up from $11,400,000 in 2019. The top tax rate remains at 40%. The annual gift tax exclusion stays at $15,000, meaning that in 2020, you can transfer up to $15,000 per recipient without incurring gift tax.

For more details on these and other IRS tax changes and their impact on you, call an Ernst & Young LLP (EY) financial planner.

This material is provided solely for educational purposes; it does not take into account any specific individual facts and circumstances. It is not intended, and should not be relied upon, as tax, accounting, or legal advice.