The tax filing season for 2019 is already upon us, and the time to file for 2020 will be here before you know it. To make it easier to understand how much you’ll need to pay on your 2020 income, we’ve shared all of the relevant 2020 tax bracket information below.
If you run a sole proprietorship, partnership, LLC or S Corporation, the profits from your business will pass through to your personal 1040 tax return, which is where you’ll need to pay the tax. You’ll also need to file other tax forms or schedules, depending on the type of business you run. Typically, that means a Schedule C for LLCs, a 1065 for partnership income or an 1120-S for an S Corporation.
You can learn about how much tax you’ll need to pay in the tables below, depending on how you’re filing for 2020. Note that these tables do not include deductions for “Qualified Business Income” (more on that below) and that you will also need to pay other types of tax like self-employment/payroll tax and local and state taxes.
2020 Federal Tax Standard Deductions
You do not need to pay federal income tax on every cent of your income. You can deduct a certain amount from your earnings before you need to pay tax on the remainder. This is your “standard deduction” and reduces your taxable income.
For example, if you’re married filing jointly (MFJ) and you and your spouse earn $170,000 in 2020, you can deduct $24,800 from that and you’ll pay federal income tax on the remaining $145,200.
2020 Tax Brackets for Single and Individual Filers
Use this table if you’re unmarried and just filing taxes for yourself in 2020.
For example, if you earn $75,000 and you take off your standard deduction of $12,400, you will need to pay federal income tax on the remaining $62,600. Looking through the table, your income falls into the $40,126 to $85,525 range. You’d pay $4,614.50 on the first $40,125 of your earnings and 22 percent on the remaining $22,475, which is another $4,944.50, for a total federal tax amount of $9,559.
2020 Tax Income Brackets for Married Filing Jointly
Use this table if you’re married and filing a joint 1040 with your spouse.
For example, if you and your spouse earn a total of $80,000 and you take off the standard deduction of $24,800, you will have $55,200 in taxable income. Looking through the table, your income falls into the $19,751 to $80,250 range. You’d pay $1,975 on the first $19,750 of your earnings and 12 percent on the remaining $35,450, which is another $4,254, for a total federal tax amount of $6,229.
2020 Tax Brackets for Married Filing Separately
If you’re married but want to file a 1040 separate to your spouse, the table below shows your federal tax bands in 2020.
The amounts shown here are identical to individual filers, and the example above applies to married people filing separately.
2020 Tax Brackets for Head of Household
A “head of household” is a person who is single or unmarried, pays more than half the cost of keeping up a home in the tax year and looks after a qualifying person like a child or parent.
For example, if you earn $46,000 and you take off your standard deduction of $14,100, you will need to pay federal income tax on the remaining $31,900. Looking through the table, your income falls into the $14,101 to $53,700 range. You’d pay $1,410 on the first $14,100 of your earnings and 12 percent on the remaining $17,800, which is another $2,136, for a total federal tax amount of $3,546.
Other Taxes Due for Your Small Business
It’s important to understand that you’ll need to pay additional taxes on top of your federal income tax if you run a small business:
Self-employment or payroll tax of 15.3 percent of what you pay yourself and your spouse
Speak to your accountant about paying those taxes.
Qualified Business Income
Under certain circumstances, and up to a maximum amount, you can deduct up to 20 percent of your business profits when it comes to working out your taxable income for federal tax. This can reduce your tax burden significantly. Speak to your accountant to find out more. And don't forget that Incfile offers a business and personal tax service. We can answer your questions and file your taxes for you, making the process easy and simple.
This information is not intended to provide finance or tax advice, and everyone’s tax circumstances are different. Speak to a qualified accountant or tax preparer about your situation to ensure you get the right information and support to file and pay your taxes properly.
Paul is a freelance writer, small business owner, and British expat exploring the U.S. When he’s not politely apologizing, he enjoys hats, hockey, Earl Grey Tea, mountains, and dogs.