Tax Changes for Businesses in 2020


increase in tax limits for businesses for 2020An array of tax-related limits that affect businesses are annually indexed for inflation, and many have increased for 2020. Here are some tax changes for 2020 that may be important to you and your business. Here are the tax limits for 2019 For reference purposes.

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).

Deductions

Section 179 Expensing:

  • Limit: $1.04 million (up from $1.02 million for 2019).
  • Phaseout: $2.59 million (up from $2.55 million).

Sec. 199A

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).

Retirement Plans

  • 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

  • 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 changes for 2020 and new limits that may affect your business. Additional rules may apply. If you have questions, please contact us.