How Will Tax-limit Increases Affect You and Your Business in 2020?

How Will Tax-limit Increases Affect You and Your Business in 2020?

  • Learn why we have new tax-limit increases.
  • Learn how new tax-limits will affect your deductions.
  • Discover how new limits will impact your retirement savings.
  • Find out more about employee benefits of the new tax-limit increases!

It’s 2020 and here come the tax-limit increases! Ch-ch-ch-changes often mean ch-ch-ch-ching, so Fiducial is putting them in one place for you. Every year, an array of tax-related limits that affect businesses are indexed for inflation, so it’s not unusual to see things like this shift. Here are some of the tax-limit increases that may be important to you and your business in 2020.

Social Security tax

The amount of employees’ earnings that are subject to Social Security tax is capped for 2020 at $137,700 (up from $132,900 for 2019).

Tax-limit increases and your deductions

  • Section 179 expensing:
    • Limit: $1.04 million (up from $1.02 million for 2019)
    • Phaseout: $2.59 million (up from $2.55 million)
  • Income-based phase-out for certain limits on the Sec. 199A qualified business income deduction begins at:
    • Married filing jointly: $326,600 (up from $321,400)
    • Married filing separately: $163,300 (up from $160,725)
    • Other filers: $163,300 (up from $160,700)
tax-limit increases, retirement, Pink sunset couple
Photographer: Harli Marten | Source: Unsplash

How will your retirement plans change with new tax-limit increases?

  • Employee contributions to 401(k) plans: $19,500 (up from $19,000)
  • Catch-up contributions to 401(k) plans: $6,500 (up from $6,000)
  • Employee contributions to SIMPLEs: $13,500 (up from $13,000)
  • Catch-up contributions to SIMPLEs: $3,000 (no change)
  • Combined employer/employee contributions to defined contribution plans (not including catch-ups): $57,000 (up from $56,000)
  • Maximum compensation used to determine contributions: $285,000 (up from $280,000)
  • Annual benefit for defined benefit plans: $230,000 (up from $225,000)
  • Compensation defining a highly compensated employee: $130,000 (up from $125,000)
  • Compensation defining a “key” employee: $185,000 (up from $180,000)

Other employee benefits of tax-limit increases

  • Qualified transportation fringe-benefits employee income exclusion: $270 per month (up from $265)
  • Health Savings Account contributions:
    • Individual coverage: $3,550 (up from $3,500)
    • Family coverage: $7,100 (up from $7,000)
    • Catch-up contribution: $1,000 (no change)
  • Flexible Spending Account contributions:
    • Health care: $2,750 (no change)
    • Dependent care: $5,000 (no change)

These are only some of the tax-limit increases that may affect your business and additional rules may apply. Have questions? Fiducial can answer them! Call 1-866-FIDUCIAL to speak to one of our representatives or make an appointment at one of our office locations. Tax laws change, and we're on top of it. We can go over these changes and find out how they apply to and your business. Ready to book an appointment now? Click here. If you know someone who might need our services, we love referrals!