Do I need to file a return?
It may come as a surprise to you that there are circumstances in which you are not required to file a tax return. In most cases, you do not need to file a tax return if your income is under these amounts:
| 2019 Filing Status | Federal (65+) | Federal (<65) | Arizona resident (65+) | Arizona resident (No tax*) |
|---|---|---|---|---|
| Single | $12,200 | $13,850 | $5,500 | $12,200 |
| Head of Household | $18,350 | $20,000 | $5,500 | $18,350 |
| Married Filing Jointly | $24,400 | $25,700 | $11,000 | $24,400 |
| Married Filing Separately | $5 | $5 | $5,500 | $12,200 |
| Widow(er) with qualifying dependent | $24,400 | $25,700 | N/A | N/A |
***Exceptions***
- If you had self-employment income of $400 or more.
- If someone else (like your parents) could claim you as a dependent and you earned over $12,200 or had investment income (interest on savings, stock dividends, etc.) of more than $1,100.
- Had withholding on wages, pensions, retirement distributions or investment accounts.
- Are eligible for an earned income credit or other credit.
The federal Form 1040 actually collects several other taxes including:
- Self employment (Social Security and Medicare) tax
- Social Security and Medicare tax on tip income
- Early withdrawal tax on IRA’s and retirement plans
- Alternative Minimum Tax & Net Investment Income Tax
- Household employee payroll tax (“nanny tax”)
**These are completely circumstantial and if you are unsure whether or not to file taxes, fill out the ‘Contact Me’ form, or give me a call.
What is the standard deduction?
The IRS excludes from your taxable income a specified amount of expenses, called a “standard deduction.”
Itemizing
Deducting your actual expenses, or itemizing, should be done when your total expenses in the allowed categories total more than the standard deduction amount.
You are better off using the standard deduction if your itemized deductions are less than the standard amount.
What is my personal exemption?
There are no longer personal exemptions for Arizona.
From 2018 and on. the Tax Cuts and Jobs Act of 2017 eliminated federal personal exemptions on federal returns, which Arizona has also conformed to.
What is my tax bracket?
A tax bracket is the rate at which the top of your income is taxed.
Income tax is based on your income after standard or itemized deductions, and other adjustments are subtracted.
Federal
| 2019 | Single | HOH | MFJ or QW | MFS | Trust |
|---|---|---|---|---|---|
| 10% | $0 | $0 | $0 | $0 | $0 |
| 12% | $9,700 | $13,850 | $19,400 | $9,700 | N/A |
| 22% | $39,475 | $52,850 | $78,950 | $39,475 | N/A |
| 24% | $84,200 | $84,200 | $168,400 | $84,200 | $2,600 |
| 32% | $160,725 | $160,700 | $321,450 | $160,725 | N/A |
| 35% | $204,100 | $204,100 | $408,200 | $204,100 | $9,300 |
| 37% | $510,300 | $510,300 | $612,350 | $306,175 | $12,750 |
Arizona
| 2019 | Single | HOH | MFJ | MFS | Trust |
|---|---|---|---|---|---|
| 2.59% | $0 | $0 | $0 | $0 | $0 |
| 3.34% | $26,500 | $53,000 | $53,000 | $26,500 | $26,500 |
| 4.17% | $53,000 | $106,000 | $106,000 | $53,000 | $53,000 |
| 4.50% | $159,000 | $318,000 | $318,000 | $159,000 | $159,000 |
How much can I deduct for mileage?
Standard mileage rates may be used as an alternative to deducting actual expenses.
The standard mileage rate must be claimed the first year a vehicle is used for deductible purposes; you cannot change to it once you have started claiming actual expenses. To deduct either mileage or actual expenses, you must have a written record for each trip showing: Date, Miles driven, Where to, Business purpose.
Mileage Rates
| Use | 2020 | 2019 |
|---|---|---|
| Business | 57½¢ | 58¢ |
| Medical | 17¢ | 20¢ |
| Moving | N/A | N/A |
| Charitable | 14¢ | 14¢ |
How much can I contribute to my retirement plan?
You can contribute up to the lesser of 100% of your earned income or $6,000 for 2019. For 2020, you can contribute up to the lesser of 100% of your earned income or $6,000.
If you are a taxpayer over the age of 50, you are able to contribute a higher amount to your retirement plan, whether or not you had contributed the maximum amounts earlier in life.
Retirement plan contribution limits
| Year | IRA & Roth (<50) | IRA & Roth (+50) | 401(k) & 403(b) (<50) | 401(k) & 403(b) (+50) | SEP (25% of Pay) |
|---|---|---|---|---|---|
| 2020 | $6,000 | $7,000 | $19,500 | $26,000 | $57,000 |
| 2019 | $6,000 | $7,000 | $19,000 | $25,000 | $56,000 |
| 2018 | $5,500 | $6,500 | $18,500 | $24,500 | $55,000 |