These Are the Tax Brackets for 2020 (Plus 4 Tax Changes to Know About)

The year 2020 is looking a lot like 2019, at least in terms of taxes.

The IRS just released its inflation adjustments for 2020 federal income tax rates and brackets. While these changes are unlikely to have a huge impact on your bottom line, there are a few things you should be aware of heading into the new year.

Because these are the 2020 tax rates, they’ll determine your tax bill that will be due in 2021. You’ll use 2019 rates and brackets when you file your taxes on or before April 15, 2020.

How the 2020 Tax Brackets Break Down

There are seven tax brackets that range from 10% to 37%. The 2020 tax brackets break down as follows:

Unmarried Individuals

Tax Bracket	Taxable Income
10%	Up to $9,875
12%	$9,875 to $40,125
22%	$40,125 to $85,525
24%	$85,525 to $163,300
32%	$163,300 to $207,350
35%	$207,350 to $518,400
37%	Over $518,400

Married Individuals Filing Jointly or Surviving Spouses

Tax Bracket	Taxable Income
10%	Up to $19,750
12%	$19,750 to $80,250
22%	$80,250 to $171,050
24%	$171,050 to $326,600
32%	$326,600 to $414,700
35%	$414,700 to $622,050
37%	Over $622,050

Heads of Household

Tax Bracket	Taxable Income
10%	Up to $14,100
12%	$14,100 to $53,700
22%	$53,700 to $85,500
24%	$85,500 to $163,300
32%	$163,300 to $207,350
35%	$207,350 to $518,400
37%	Over $518,400

Pro Tip

Not sure of your filing status? This interactive IRS quiz can help you determine the correct status. If you qualify for more than one, it tells you which one will result in the lowest tax bill.

Tax rates apply to the income within each bracket. So if you’re an unmarried individual with taxable income of $50,000, you won’t pay 22% of that $50,000 to Uncle Sam.

According to the 2020 tax brackets, you’d pay:

• 10% on the first $9,875
• 12% on the next $30,250 ($40,125 – $9,875 = $30,250)
• 22% on the next $9,875 ($50,000 – $40,125 = $9,875)

4 Tax Changes That Could Affect You in 2020

The modified tax brackets aren’t the only changes the IRS announced. About 60 tax provisions will be adjusted in the new year. A few highlights:

• The standard deduction will rise slightly: The standard deduction will rise by $200 to $12,400 for people who are single filers or married filing separately. For those who are married filing jointly, the standard deduction will rise by $400 to $24,800.

• You may be able to save an extra $500 for retirement: If you have an employer-sponsored tax-deferred retirement plan, like a 401(k) or 403(b), your maximum contribution is $19,500 in 2020, up from $19,000 in 2019. The additional “catch-up” contribution workers ages 50 and older can make will also go up by $500, from $6,000 to $6,500.

• You can contribute an extra $50 to a flexible spending account. In 2020, the maximum contribution individuals can contribute is $2,750.

• Some limited-income families can get an extra $103. The maximum Earned Income Tax Credit will increase to $6,660. You need at least three children to qualify for the maximum amount.

3 Tax Rules That Aren’t Changing in 2020

• IRA contribution limits won’t change. The traditional and Roth IRA contribution limits will remain at $6,000 for people under 50. The extra $1,000 “catch-up” contribution the IRS allows people 50 and older to make won’t change either.

• You can still gift someone up to $15,000 without paying the federal gift tax. The gift tax exemption is something you might want to take advantage of if you’re contributing to a 529 plan.

• There’s no limit on itemized deductions. The Tax Cuts and Jobs Act of 2017 suspended these limits.

Ready to Start Your 2020 Tax Prep?

OK, we get it: You’re probably not thinking about your 2020 taxes yet. After all, you haven’t even had your 2019 Thanksgiving turkey.

But if you’re the plan-ahead type, you can check out this comprehensive summary of 2020 tax changes courtesy of the IRS.

Even if you’re not ready to jump into 2020 tax planning mode just yet, keep in mind that a new year is often a good time to check your tax withholdings and make adjustments if necessary. So make a date with yourself in early January for a quick tax checkup.

Robin Hartill is a senior editor at The Penny Hoarder. She edits and writes stories about bank accounts, credit scores, home buying, insurance, investing, retirement and taxes. She is also the voice behind the Dear Penny personal advice column, which is syndicated in the Tampa Bay Times Sunday business section.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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Best Mortgage Rates in Alabama

According to real estate data obtained from Zillow, Alabama homes are currently holding at a median value of $130,300 compared to the median price of sold homes, which stands at $152,800.

One reason for this disparity is the relatively the state’s housing market, which puts sellers in a strong position to negotiate higher purchase prices. Homes in Alabama are on the market for a shorter length of time than other states, roughly 89 days on average, and price drops occur much less frequently.

The state’s median listing price sits at around $205,742, though some regions have significantly lower price points.

Alabama has seen median home values rise by 7.5 percent since 2017, a trend that is expected to slow down going forward. Zillow estimates a 3.7 percent rise during 2019, yet home values will remain far below the national median of $220,100.

These increases should not have a significant impact on the mortgage and refinance rates offered by Alabama lenders, so now may be a good time to purchase a home in the state.

To give you the best chances at an affordable rate, we’ve put together the following list of important factors to consider when shopping for a mortgage in Alabama.

Table of Contents:

• Rates in Alabama
• Mortgage Factors
• How to Get The Best Rates
• Recommended Companies

Current Mortgage Rates in Alabama

Today's Best Home Mortgage Rates

Select your state to get started

Mortgage Rates Factors Rates in Alabama

Lending agents reference a number of important factors to determine what interest rates to offer, ranging from financial criteria to loan specifics.

Every loan rate is negotiated on a case-by-case basis, so a borrower’s economic standing and payment limitations are always taken into account. To get the best mortgage and refinance rates in Alabama, it’s important to understand what lenders will be looking for and why.

Loan type

every lender has its own catalog of mortgage and refinance products, often with a variety of different eligibility guidelines.

Fixed-rate mortgages allow borrowers to lock down a consistent rate over the full life of their loan whereas adjustable-rate options are based on a variable interest rate that may fluctuate over time.

It’s important to consider the difference between a conventional mortgage and refinance programs versus the government-backed options that many lenders facilitate.

Mortgages insured by the government, such as Federal Housing Administration (FHA), United States Department of Agriculture (USDA) and Veterans Affairs (VA) loans, usually have lower rates than conventional options, but they can be more difficult to qualify for due to the strict eligibility guidelines.

Loan term

after you’ve narrowed down the list of mortgage or refinance types, the next step is to decide which repayment term best suits your financial obligations.

Longer loan terms typically feature higher interest rates and lower monthly payments, making it a solid choice for homebuyers looking to settle down for several years.

Short repayment terms benefit from lower rates, but the higher monthly payments may be a burden for some low-to-moderate income borrowers. Selecting the best loan term depends on your level of income, how much you have stashed in savings and your plans for the future.

Credit score

when lenders calculate interest rates for mortgage and refinance loans, your credit score is one of the first financial metrics they consider.

Credit scores are seen as a general indicator of how well a borrower manages debt, which helps lenders evaluate program eligibility and formulate interest rates. Homebuyers with high credit scores can qualify for a wider selection of home loan programs and are able to negotiate for a more competitive rate.

Borrowers with low credit scores often have a harder time qualifying for a conventional mortgage and refinance loans, though there are several government-backed programs with low credit score minimums.

Credit history

in addition to credit scores, lenders also review borrowers’ credit histories before approving their mortgage or refinance loan application. Most lending institutions consider limited credit history as a high-risk factor as it introduces a degree of uncertainty into the application process.

Even if you’ve been approved, a sparse credit history may prevent you from landing the best available interest rate because the lender has no basis for judging whether you’ll be able to make your monthly payments consistently and on time.

Luckily, some lending institutions will allow you to submit non-traditional credit information, like utility bills and rent payments, though you should still expect a tough rate negotiation process.

How to Get the Best Mortgage Rates in Alabama

Securing the best mortgage and refinancing rates in Alabama starts with research and preparation. The only way to get a good deal is to understand your specific lending needs and anticipate the complex questions lenders will ask.

Your long-term goals and financial limitations should always be the driving force behind your search for the best available rates, so consider the following tips before you apply:

Review your finances

the first step to landing a competitive rate is to pool together all of your financial information, including your credit score and history, income level, debt-to-income ratio, and how large of a down payment you can afford.

Having this info on hand will help you confidently answer lenders’ questions during the application and negotiation process. It’s also helpful to review local housing market performance to get an idea for how the size, location, listing price and amenities of your home may impact the rates you’re offered.

Remember, the loan type and term you apply for should align with your specific economic standing and the debt you’re already paying off.

Weigh your options carefully

the next step is to shop around with different lenders to understand what mortgage or refinance options are available. If you have a high credit score you will likely qualify for a wide variety of home loans from different lending institutions, which may make it difficult to narrow your search.

Thinking about your long-term plans is a great place to start, as it will help you decide what loan type, fixed- or adjustable-rate, will best suit your needs. Borrowers with low credit scores may have fewer options to choose from, especially if they’re unable to make a large down payment.

Looking into government-backed programs, like FHA and USDA mortgages, is a great way to find an affordable loan if you’re unable to qualify for conventional alternatives

Ask lots of questions

When it comes time to start negotiating rates, make sure to bring along a comprehensive list of targeted questions that will keep the discussion focused on the information you need.

Most lenders are accustomed to working with borrowers who have limited experience with the mortgage and refinance application process, so many are accustomed to steering the conversation. Nearly half of all mortgage borrowers don’t shop around when buying a home, which can put them in a difficult position when an offer is made.

Don’t let lending agents pressure you into filling out paperwork unless you’re sure about the rate offer, and never be afraid to walk away from the negotiating table.

You should ask lenders about down payment minimums, private mortgage insurance requirements, credit score criteria, the benefits and limitations of each loan program as well as whether there are back-end fees.

Recommended Companies in Alabama

Alabama has a diverse collection of reputable lenders to choose from, which may make locating the best mortgage or refinance rates a challenge unless you have ample research time.

Reading online customer reviews can give you a general idea about a lender’s services, but contacting an agent directly is the quickest way to find out more.

Asking questions is a commitment-free activity, so don’t be afraid to shop around before you make a final decision. Some of the top mortgage lenders in Alabama are:

Quicken Loans

a nationally recognized lender, the company has earned the reputation as one of the best choices for a mortgage and refinance loans. This lender offers a 90-day rate protection guarantee that locks in your quoted rate to protect against market fluctuations during the negotiation process.

New American Funding

this lender regularly works with low-to-moderate income borrowers and homebuyers with credit scores as low as 580. The company offers a conventional fixed and adjustable-rate mortgages along with a variety of government-back programs, including FHA, USDA, and VA.

If you’re having a difficult time qualifying for a mortgage or refinance loan from other lenders, New American Funding may be the solution.

Rocket Mortgage

if you’re looking for fast approval, this lender boasts one of the most streamlined mortgage and refinance application processes in the country. Rocket Mortgage has ranked at the top of J.D. Power’s Primary Mortgage Origination Customer Satisfaction list for eight years in a row.

LendingTree

this online marketplace allows borrowers to compare rates from a wide variety of lenders all at once. Homebuyers looking for online comparative shopping can take advantage of LendingTree’s easy to use interface and search function. 

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