Here are the tax bracket & 401(k) contribution changes for 2020

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Here are the tax bracket & 401(k) contribution changes for 2020

The Internal Revenue Service released new income tax brackets and retirement contribution limits for 2020 on Tuesday. The tax rates were unchanged, but the new tax income limits were adjusted for inflation.

How are taxes determined? The IRS uses tax brackets. For every dollar of income that falls into each bracket, you owe a percentage of that dollar in taxes. Learn more about how taxes are determined here.

Here’s a breakdown of the 2020 tax brackets.

For unmarried individuals filing as single:

  • 10%: Income up to $9,875
  • 12%: Income between $9,875 and $40,125
  • 22%: Income between $40,125 and $85,525
  • 24%: Income between $85,525 and $163,300
  • 32%: Income between $163,300 and $207,350
  • 35%: Income between $207,350 and $518,400
  • 37%: Income over $518,400

For married individuals filing jointly:

  • 10%: Income up to $19,750
  • 12%: Income between $19,750 and $80,250
  • 22%: Income between $80,250 and $171,050
  • 24%: Income between $171,050 and $326,600
  • 32%: Income between $326,600 and $414,700
  • 35%: Income between $414,700 and $622,050
  • 37%: Income over $622,050

For married individuals filing separately:

  • 10%: Income up to $9,875
  • 12%: Income between $9,875 and $40,125
  • 22%: Income between $40,125 and $85,525
  • 24%: Income between $85,525 and $163,300
  • 32%: Income between $163,300 and $207,350
  • 35%: Income between $207,350 and $311,025
  • 37%: Income over $311,025

For heads of households:

  • 10%: Income up to $14,100
  • 12%: Income between $14,100 and $53,700
  • 22%: Income between $53,700 and $85,500
  • 24%: Income between $85,500 and $163,300
  • 32%: Income between $163,300 and $207,350
  • 35%: Income between $207,350 and $518,400
  • 37%: Income over $518,400

Retirement contribution limits for 2020

The IRS also raised 2020 contribution limits for 401(k), 403(b), most 457 plans and the federal Thrift Savings plan, from $19,000 to $19,500. The catch-up contribution limit for employees aged 50 and up increased from $6,000 to $6,500.

The limit on annual contributions to an independent retirement account remains unchanged at $6,000.

Most Americans don’t save enough for retirement. While it may seem like a formidable task, a little bit of money can go a long way, thanks to compound interest. Even increasing your monthly contribution by 1% can make a huge difference over time. If your employer matches your contribution, try and meet their match.

Here are some more ways to catch up.

Image: Giorgio Trovato