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2019 INCOME AND PAYROLL TAX RATES

SINGLE TAXPAYER RATES

Taxable Income

Tax Before Credits

Over But not over Flat amount +% Of excess over 
$0 $9,700 $0 10% $0 
9,700 39,475 970.00 12% 9,700 
39,475 84,200 4,543.00 22% 39,475 
84,200 160,725 14,382.50 24% 84,200 
160,725 204,100 32,748.50 32% 160,725 
204,100 510,300 46,628.50 35% 204,100 
510,300 ———- 153,798.50 37% 510,300 

HEAD OF HOUSEHOLD RATES

Taxable Income

Tax Before Credits

MARRIED FILING JOINTLY RATES

Taxable Income

Tax Before Credits

Over But not over Flat amount +% Of excess over 
$0 $19,400 $0 10% $0 
19,400 78,950 1,940.00 12% 19,400 
78,950 168,400 9,086.00 22% 78,950 
168,400 321,450 28,765.00 24% 168,400 
321,450 408,200 65,497.00 32% 321,450 
408,200 612,350 93,257.00 35% 408,200 
612,350 ———- 164,709.50 37% 612,350 

MARRIED FILING SEPARATELY RATES

Taxable Income

Tax Before Credits

Over But not over Flat amount +% Of excess over 
$0 $13,850 $0 10% $0 
13,850 52,850 1,385.00 12% 13,850 
52,850 84,200 6,065.00 22% 52,850 
84,200 160,700 12,962.00 24% 84,200 
160,700 204,100 31,322.00 32% 160,700 
204,100 510,300 45,210.00 35% 204,100 
510,300 ———- 152,380.00 37% 510,300 

TRUSTS AND ESTATES RATES

Over But not over Flat amount +% Of excess over 
$0 $9,700 $0 10% $0 
9,700 39,475 970.00 12% 9,700 
39,475 84,200 4,543.00 22% 39,475 
84,200 160,725 14,382.50 24% 84,200 
160,725 204,100 32,748.50 32% 160,725 
204,100 306,175 46,628.50 35% 204,100 
306,175 ———- 82,354.75 37% 306,175 

SOCIAL SECURITY PAYROLL TAX

Taxable Income

Tax Before Credits

OverBut not overFlat amount+%Of excess over
$           0$         2,600$                   010%$                      0
2,6009,300260.0024%2,600
9,30012,7501,868.0035%9,300
12,750———-3,075.5037%12,750
 Minimum Taxable Wage BaseTax
Rate
Maximum Tax
Employee$132,9006.2%$8,239.80
Self-Employed$132,90012.4%$16,479.60

MEDICARE PART A PAYROLL  TAX

Taxable Wage BaseTax RateMaximum Tax
EmployeeInitial $250,000 (joint filers)1.45%$3,625.00
Initial $125,000 (married filing separately)1.45%$1,812.50
Initial $200,000 (all others)1.45%$2,900.00
Wages over $250,000 (joint filers)2.35%(no maximum)
Wages over $125,000 (married filing separately)2.35%(no maximum)
Wages over $200,000 (all others)2.35%(no maximum)
EmployerAll wages1.45%
Self-EmployedInitial $250,000 (joint filers)2.9%$7,250.00
Initial $125,000 (married filing separately)2.9%$3,625.00
Initial $200,000 (all others)2.9%$5,800.00
Wages over $250,000 (joint filers)3.8%(no maximum)
Wages over $125,000 (married filing separately)3.8%(no maximum)
Wages over $200,000 (all others)3.8%(no maximum)

2020 INCOME AND PAYROLL TAX RATES

SINGLE TAXPAYER RATES

Taxable Income  

Tax Before Credits

MARRIED FILING JOINTLY RATES

Taxable Income

Tax Before Credits

OverBut not overFlat amount+%Of excess over
$             0$          9,875$                   010%$                       0
9,87540,125987.5012%9,875
40,12585,5254,617.5022%40,125
85,525163,30014,605.5024%85,525
163,300207,35033,271.5032%163,300
207,350518,40047,367.5035%207,350
518,400———-156,235.0037%518,400

OverBut not overFlat amount+%Of excess over
$            0$        19,750$                   010%$                      0
19,75080,2501,975.0012%19,750
80,250171,0509,235.0022%80,250
171,050326,60029,211.0024%171,050
326,600414,70066,543.0032%326,600
414,700622,05094,735.0035%414,700
622,050———-167,307.5037%622,050

 HEAD OF HOUSEHOLD RATES

Taxable Income

Tax Before Credits

OverBut not overFlat amount+%Of excess over
$            0$         14,100$                   010%$                      0
14,10053,7001,410.0012%14,100
53,70085,5006,162.0022%53,700
85,500163,30013,158.0024%85,500
163,300207,35031,830.0032%163,300
207,350518,40045,926.0035%207,350
518,400———-154,793.5037%518,400

TRUSTS AND ESTATES RATES

Taxable Income  

 Tax Before Credits

OverBut not overFlat amount+%Of excess over
$          0$         2,600$                   010%$                       0
2,6009,45026024%2,600
9,45012,9501,90435%9,450
12,950———-3,12937%12,950

MARRIED FILING SEPARATELY RATES

Taxable Income 

Tax Before Credits

OverBut not overFlat amount+%Of excess over
$              0$         9,875$                   010%$                      0
9,87540,125987.5012%9,875
40,12585,5254,617.5022%40,125
85,525163,30014,605.5024%85,525
163,300207,35033,271.5032%163,300
207,350311,02547,367.5035%207,350
311,025———-83,653.7537%311,025

SOCIAL SECURITY PAYROLL TAX

 Miniumum Taxable Wage BaseTax
Rate
Maximum
Tax
Employee$137,7006.2%$8,537.40
Self-Employed$137,70012.4%$17,074.80

MEDICARE PART A PAYROLL TAX

Taxable Wage BaseTax RateMaximum Tax
EmployeeInitial $250,000 (joint filers)1.45%$3,625.00
Initial $125,000 (married filing separately)1.45%$1,812.50
Initial $200,000 (all others)1.45%$2,900.00
Wages over $250,000 (joint filers)2.35%(no maximum)
Wages over $125,000 (married filing separately)2.35%(no maximum)
Wages over $200,000 (all others)2.35%(no maximum)
EmployerAll wages1.45%
Self-EmployedInitial $250,000 (joint filers)2.9%$7,250.00
Initial $125,000 (married filing separately)2.9%$3,625.00
Initial $200,000 (all others)2.9%$5,800.00
Wages over $250,000 (joint filers)3.8%(no maximum)
Wages over $125,000 (married filing separately)3.8%(no maximum)
Wages over $200,000 (all others)3.8%(no maximum)

CORPORATE TAX RATE

Taxable income is taxed at a flat rate of 21%.

ALTERNATIVE MINIMUM TAX

Taxpayers are subject to an “alternative minimum tax” (AMT) instead of the regular income tax when they have substantial “preference income.” This is income that is treated favorably under the regular income tax. Basically, the taxpayer must pay whichever tax is higher—the regular tax or the AMT.

Filing Status2019 Exemption2020 Exemption
Single or head of household$71,700$72,900
Married filing jointly$111,700$113,400
Married filing separately$55,850$56,700

The exemption amounts are phased out for higher-income taxpayers. The income thresholds are:

2019 –  Married filing jointly – $1,020,600

2020 – Married filing jointly – $1,036,800

All other taxpayers – $510,300

All other taxpayers – $518,400

AMT Income in Excess of Exemption  2019/2020

First $194,800*  / $197,900

Above $194,800  / $197,900

AMT Rate

26%

28%

*$97,400 / $98,950 for married persons filing separately

KIDDIE TAX ON UNEARNED INCOME

 201820192020Income Tax Bracket
First$1,050$1,100$1,100No Tax
Next$1,050$1,100$1,100Child’s Bracket
Amounts Over$2,100$2,200$2,200Trusts and Estates/Parents’ Bracket**

The “kiddie tax” applies to: a) a child under age 18; b) a child age 18 whose earned income does not exceed one-half of his or her support; or c) a child age 19-23 whose earned income does not exceed one-half of his or her support, and who is a full-time student. Furthermore, the child does not file a joint income tax return and has at least one living parent at the end of the tax year.

**Under Tax Cut and Jobs Act (“TCJA”) the trusts and estates tax rate was applied to this income for both 2018 and 2019. The Setting Every Community Up for Retirement Enhancement (“SECURE”) Act provides that for 2020 and beyond, the parents’ tax rate will apply. However, the parents’ rates may apply retroactively for 2018 and 2019  with amended returns.

INCOME TAXATION OF SOCIAL SECURITY BENEFITS

Retired taxpayers with incomes over certain threshold amounts are subject to income tax on their Social Security retirement benefits. The special tax base for determining whether a taxpayer’s benefits are subject to tax equals one-half of Social Security benefits plus all other income (including tax-exempt income).

Filing StatusTax Base% of Benefits Taxed
Single or head of household$25,000 – $34,00050%
 Over $34,00085%
Married filing jointly$32,000 – $44,00050%
 Over $44,00085%

Married filing separately                            Depends on whether the spouses live together during the tax year

For example, a married couple filing jointly has an adjusted gross income of $30,000, tax- exempt interest of $3,000, and receives $24,000 in Social Security benefits. The special tax base for the couple equals $45,000, and $6,850 of the Social Security benefits are taxable (.50 x $12,000 = $6,000; .85 x $1,000 = $850; total $6,850).

STANDARD DEDUCTION

Amount – The standard deduction is a flat amount that a taxpayer may deduct in lieu of itemizing deductions. The standard deduction amount for each taxpayer category is:

Taxpayer Status20192020
Single$12,200$12,400
Married filing jointly$24,400$24,800
Head of household$18,350$18,650
Married filing separately$12,200$12,400

Age 65 or Blind – Taxpayers who are age 65 or over, or who are blind, may take an additional standard deduction (provided they do not itemize). For both 2019 and 2020, the additional standard deduction amount is $1,300 if married or $1,650 if the person is unmarried and not a surviving spouse.

This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state or local tax penalties. This material is written to support the promotion or marketing of the transaction(s) or matter(s) addressed by this material. Pacific Life Insurance Company, its affiliates, their distributors and respective representatives do not provide tax, accounting or legal advice. Any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor or attorney. Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products.

ITEMIZED DEDUCTIONS

Interest Expense – Most personal interest paid is not deductible, with certain important exceptions:

DeductibleNot Deductible
Mortgage interest on one or two residences up to
$750,000 of indebtedness (applies only to new mortgages taken out after December 15, 2017; older mortgages remain tied to the $1,000,000 cap)
Auto loan interest
Points on home mortgagesCredit card interest
Business interestHome equity loan interest
Investment interest up to net investment incomeMost other consumer loan interest
Prepaid interest other than points on home mortgages

State and Local Taxes – Itemizers may deduct either state and local income taxes, or state and local sales taxes. Also, itemizers may deduct state and local real property taxes and personal property taxes. The combined deduction for state property and income taxes is capped at $10,000. Taxpayers may not deduct state and local taxes in calculating the AMT unless they are deductible in computing adjusted gross income (“above-the-line” deductions, not itemized).

Medical and Dental Expenses – Expenses paid for nearly all medical, dental and vision care during the year, and not reimbursed by insurance or other means, are deductible by itemizers to the extent that the total of such expenses exceeds 7.5% of AGI in 2019 and 2020.

Losses – Individuals can deduct two basic types of losses: 1) business losses incurred in the taxpayer’s unincorporated business, or 2) investment losses if the investment was originally motivated by profit. Casualty and theft losses are not deductible except for declared national disasters.

DEDUCTION FOR QUALIFIED BUSINESS INCOME

Owners of pass-through entities are taxed on business income at their individual income tax rates, but may claim a 20% deduction of their share of the business income—even if they elect to use the standard deduction instead of itemizing.

A number of “specified service trades or businesses” do not qualify for the deduction, subject to the following thresholds on qualified business income:

 20192020
Married filing jointly$321,400$326,600
Married filing separately$160,725$163,300
Single$160,700$163,300
Head of Household$160,700$163,300

 CAPITAL GAINS AND DIVIDENDS

2019 Maximum Tax Rate on Long-Term Capital Gains and Most Corporate Dividends

Tax RateSingleMarried (Joint)*Head of HouseholdEstate or Trust
0%$0 – $39,375$0 – $78,750$0 – $52,750$0 – $2,650
15%$39,376 – $434,550$78,751 – $488,850$52,751 – $461,700$2,651 – $12,950
20%over $434,550over $488,850over $461,700over $12,950

2020 Maximum Tax Rate on Long-Term Capital Gains and Most Corporate Dividends

Tax RateSingleMarried (Joint)*Head of HouseholdEstate or Trust
0%$0 – $40,000$0 – $80,000$0 – $53,600$0 – $2,650
15%$40,001 – $441,450$80,001 – $496,600$53,601- $469,050$2,651 – $13,150
20%over $441,450over $496,600over $469,050over $13,150

*One half of these amounts in the case of married filing separately.

Holding Period – The long-term rate generally applies to gains on the sale of capital assets held for more than one year.

Short-Term Capital Gains – Net short-term capital gains (on sales of capital assets held for one year or less) are taxed at ordinary income rates.

Collectibles – Long-term capital gain from the sale of collectibles is taxed at a top rate of 28%.

Capital Losses – After capital gains and losses are netted against one another, any remaining net capital loss may be used to offset ordinary income up to $3,000 per year. Any excess net capital loss may be carried over and used in future years.

Sale of a Principal Residence – A seller of any age who has owned and used real property as a principal residence for at least two of the last five years can exclude from gross income up to $250,000 ($500,000 if married filing jointly) of gain realized on a sale.

Additional Tax on High-Income Taxpayers – Individuals with more than $200,000 in income ($250,000 for a married couple filing jointly), who also have investment income, will pay an additional tax of 3.8% on net investment income or the excess of modified adjusted gross income over the threshold amount (whichever amount is less). Investment income is defined as the sum of gross income from items such as interest, dividends, annuities, royalties, and rents, as well as net gain attributable to the disposition of property (i.e., capital gains).

 DEDUCTIONS FOR CONTRIBUTIONS TO PUBLIC CHARITIES

Type of Property
Contributed
Deemed Amount of ContributionPercentage Limitation1 2019/20
CashActual dollar amount60%
Appreciated ordinary income property2 or appreciated short-term capital gain property3Donor’s tax basis50%
Appreciated long-term capital gain property4
(a) General ruleFair market value30%
(b) Election made to reduce amount of contributionDonor’s tax basis50%
(b) Tangible personal property put to unrelated use by
donee charity
Donor’s tax basis50%

  1. The applicable “percentage limitation’’ applies to the donor’s contribution base, which is the donor’s adjusted gross income (AGI) determined without regard to any net operating loss carryback. The limitation is applied on an annual basis. Any deductible contributions that exceed the current year’s limitations may be carried over and deducted in the five succeeding tax years, subject to the percentage limitations in those years.
  2. “Ordinary income property” is property that would produce ordinary income if sold by the individual.
  3. “Short-term capital gain property” is property that would produce short-term capital gain if sold by the individual.
  4. “Long-term capital gain property” is property that would produce long-term capital gain if sold by the individual.

INDIVIDUAL  RETIREMENT ACCOUNTS

Traditional IRA

Contribution Limit – $6,000 ($7,000 for taxpayers age 50+) in 2019 and 2020. Note: For tax years beginning in 2020, the age 701/2 limit on making traditional IRA contributions is eliminated.

Deduction Limit on Qualified Retirement Plan Participants –

  • Taxpayers who do not participate in qualified retirement plans can deduct contributions to an IRA.
  • Taxpayers who do participate in qualified retirement plans are subject to a reduced deduction based on modified adjusted gross income (MAGI).
  • In 2019, the MAGI phase-out of the deduction for single taxpayers begins at $64,000 and the deduction is lost at $74,000. The MAGI phase-out of the deduction for married taxpayers filing jointly begins at $103,000 and the deduction is lost at $123,000.
  • In 2020, the MAGI phase-out of the deduction for single taxpayers begins at $65,000 and the deduction is lost at $75,000. The MAGI phase-out of the deduction for married taxpayers filing jointly begins at $104,000 and the deduction is lost at $124,000.

INDIVIDUAL RETIREMENT ACCOUNTS (continued)

Roth IRA

Contribution Limit – $6,000 ($7,000 for taxpayers age 50+) in 2019 and 2020.

Contribution Limit Based on Modified Adjusted Gross Income – The amount taxpayers can contribute to a Roth IRA is subject to a MAGI phase-out.

  • In 2019, the MAGI phase-out on Roth IRA contributions by single taxpayers begins at

$122,000 and no contribution is permitted if MAGI is $137,000 or more. The MAGI phase- out on Roth IRA contributions for married taxpayers filing jointly begins at $193,000 and no contribution is permitted if MAGI is $203,000 or more.

  • In 2020, the MAGI phase-out on Roth IRA contributions by single taxpayers begins at

$124,000 and no contribution is permitted if MAGI is $139,000 or more. The MAGI phase- out on Roth IRA contributions for married taxpayers filing jointly begins at $196,000 and no contribution is permitted if MAGI is $206,000 or more.

Deduction Limit – There is no deduction for a contribution to a Roth IRA.

DOLLAR LIMITS FOR QUALIFIED RETIREMENT PLANS

 20192020
Defined Contribution Plans – Annual additions limit for defined contributionplans [IRC Sec. 415(c)]$56,000$57,000
Defined Benefit Plans – Annual benefit limit for defined benefit plans [IRC Sec. 415(b)]$225,000$230,000
401(k) – Annual limit on deferrals [IRC Sec. 402(g)]$19,000$19,500
Plus: age 50+ catch-up$6,000$6,500
403(b) – Annual limit on deferrals [IRC Sec. 402(g)]$19,000$19,500
Plus: age 50+ catch-up$6,000$6,500
Salary Reduction SEPs (SARSEPs) – Annual limit on elective$19,000$19,500
deferral [IRC Sec. 402(g)]$6,000$6,500
Plus: age 50+ catch-up  
Annual Limit on Elective Deferrals to 457 Plans –$19,000$19,500
[IRC Sec. 457(b)(2)(c)(1)]
Plus: age 50+ catch-up
$6,000$6,500

Maximum Annual Compensation – Amount of employee
compensation that may be taken into account by plan formula (QRPs, 403(b), SEPs) [IRC Sec. 401(a)(17)]
 $280,000 $285,000

DOLLAR LIMITS FOR QUALIFIED RETIREMENT PLANS (continued)

 20192020
Nondiscrimination Rules – For “highly compensated employees” [IRC Sec. 414(q)(1)]$125,000$130,000
Annual Compensation Subject to SEP Discrimination Rules [IRC Sec. 408(k)(3)(c)]$280,000$285,000
Compensation Threshold for SEP Participation – [IRC Sec. 408(k)(2)(c)]$600$600
Annual Limit on Elective Deferrals to SIMPLE Plans –$13,000$13,500
[IRC Sec. 408(p)] Plus: age 50+ catch-up  $3,000  $3,000

REQUIRED MINIMUM DISTRIBUTIONS (RMDs)

Starting in 2020, the required beginning date for RMDs is now age 72 (up from age 701/2). Those who turned 701/2 in 2019 or earlier remain subject to the previous minimum distribution rules and must take an RMD in 2020 and beyond.

Note: This change to the RMD rules does not affect the rules for making Qualified Charitable Distributions—donors may still make QCDs directly from an IRA to charity starting at age 701/2.

An individual who inherits retirement account assets must now distribute those assets within 10 years of the account owner’s death, with no RMDs required during those 10 years. However, the following “Eligible Designated Beneficiaries” are excluded from this change and remain subject to the previous rules, which allow them to “stretch” payments over their life expectancy:

  • Surviving spouses
  • Minor children (until they reach the age of majority)
  • Disabled or chronically ill individuals
  • Individuals less than 10 years younger than the decedent

ESTATE & GIFT TAXES

2019 and 2020 Gift and Estate Tax Rates:

OverBut not overFlat Amount+%Of excess over
$0$10,000$018%$0
$10,000$20,000$1,80020%$10,000
$20,000$40,000$3,80022%$20,000
$40,000$60,000$8,20024%$40,000
$60,000$80,000$13,00026%$60,000
$80,000$100,000$18,20028%$80,000
$100,000$150,000$23,80030%$100,000
$150,000$250,000$38,80032%$150,000
$250,000$500,000$70,80034%$250,000
$500,000$750,000$155,80037%$500,000
$750,000$1,000,000$248,30039%$750,000
$1,000,000————$345,80040%$1,000,000
 Estate Tax  2019  2020
Top Estate Tax Rate40%40%
Estate Tax Applicable Exlusion Rate$11,400,000$11,580,000

Portability: The estate executor can elect to allocate the unused portion of a decedent’s estate tax applicable exclusion amount to the surviving spouse.

Gift Tax20192020
Top Gift Tax Rate40%40%
Annual Gift Tax Exclusion$15,000 per donee$15,000 per donee
Annual Gift Tax Exclusion for a Noncitizen Spouse$155,000$157,000
Lifetime Gift Tax Applicable Exclusion Amount$11,400,000$11,580,000

According to the American Taxpayer Relief Act of 2012, the federal estate, gift and generation skipping transfer (GST) tax exemption amounts are all $5,000,000 (indexed for inflation effective for tax years after 2011); the maximum estate, gift and GST tax rates are 40%.