Page 16 - Supplement to Income Tax 2020

Estimating Your 2020 Taxes

Based on a maximum earned income exclusion of American Opportunity credit and Lifetime Learning
$107,600, the base foreign housing amount is $17,216 credit (pages 613–618). The credit amount and
(16% × $107,600) for the full year, or $47.04 per day phaseout range for the American Opportunity credit
if the foreign residence or physical presence test is met are not subject to cost-of-living changes. By statute,
for only part of the year. The foreign housing exclusion the credit of up to $2,500 per eligible student phases
is allowed to the extent that housing expenses, not to out over a MAGI range of $80,000 to $90,000 for
exceed the annual limit, exceed the base amount. Based single filers, heads of households, and qualifying
on a maximum earned income exclusion of $107,600, widows/widowers, and $160,000 to $180,000 for
the 2020 limit on housing expenses will generally be joint filers.
$32,280 (30% × $107,600) for the full year, or $88.20 The Lifetime Learning credit (limited to $2,000 for
per qualifying day, but the IRS will announce a higher all eligible students claimed by a taxpayer) phases out
housing expense limit for designated high-cost areas. for 2020 over a MAGI range of $59,000 to $69,000

Earned income credit (pages 512–515). For 2020, the for single filers, heads of households, and qualifying
maximum credit is $3,584 for one child, $5,920 for widows and widowers, and $118,000 to $138,000 for
two children, $6,660 for three or more children, and joint filers. Married persons filing separately may not
$538 if there are no children. claim either credit.
For taxpayers with children, the 2020 credit will Transportation fringe benefits (pages 68–70). The
begin to phase out if either earned income or AGI 2020 monthly tax-free limit for employer-provided
is at least $19,330 if single, head of household, or transit passes and commuter van/bus transportation
qualifying widow/widower, or at least $25,220 if (paid by employer or by employee salary-reduction
married filing jointly. Married persons filing separately contributions), as well as the monthly exclusion for
may not claim the credit. For those with no children, parking benefits, is $270 per month.
the phaseout begins at $8,790, or $14,680 if married
filing jointly. For taxpayers with one child, the credit is Gift tax annual exclusion and lifetime exemption
completely phased out if either earned income or AGI from gift tax and estate tax (pages 672-677). The
is $41,756 or more, $47,646 if married filing jointly. annual exclusion for gifts made in 2020 is $15,000
For two children, the credit is completely phased out per individual donee (unchanged from 2019).
if either earned income or AGI is at least $47,440, Married couples can agree to “split” one spouse’s
$53,330 if married filing jointly. For taxpayers with gifts, doubling the 2020 exclusion for each donee to
three or more children, the credit is completely phased $30,000. The unlimited marital deduction applies to
out if either earned income or AGI is at least $50,954, gifts made to a spouse who is a U.S. citizen. For gifts
$56,844 if married filing jointly. For taxpayers with to a noncitizen spouse, the annual exclusion for 2020
no children, the phaseout is complete at income of is $157,000.
$15,820, $21,710 if married filing jointly. The “lifetime” exclusion (exemption) from gift tax
that applies to taxable gifts in excess of the annual
Student loan interest deduction (pages 619–621). The exclusion and other tax-free gifts is the same as the
maximum above-the-line deduction for student loan basic exemption for estate tax purposes. For 2019, the
interest is set by statute at $2,500. For 2020, the exemption amount is $11.58 million (up from $11.4
$2,500 limit is phased out if modified adjusted gross
income (MAGI) is between $140,000 and $170,000 million in 2019).
for married couples filing jointly, or between $70,000 Attorney fee awards (page 800). The limit on attorney
and $85,000 if single, head of household, or qualifying fee awards for taxpayers who substantially prevail
widow/widower. Married persons filing separately and against the IRS is generally $210 per hour for fees
individuals who meet the definition of a dependent incurred in 2020 (up from $200 in 2019); a court may
are not eligible for the deduction. increase the $210 limit in special cases.

12 | Supplement to J.K. Lasser’s Your Income Tax 2020