It’s that time of the year again! The IRS has issued its 2020 inflation adjustments. Just like last year, we will provide you with an overview of the adjustments related to international tax items for tax year 2020. Please feel free to hop over to our 2019 inflation adjustments blog for adjustments made in 2019.

Inflation Adjustments Relating to Expatriates:

For ex-pats, there are two international tax items adjusted for inflation this year:

  • Code § 877(a)(2)(A): For 2020, for an individual to be considered a “covered expatriate,” the average annual net income tax for the five taxable years ending before the date of the loss of United States citizenship, has been bumped up to $171,000 from $168,000 in 2019.
  • Code § 877A(a)(1): For 2020, covered expatriates are allowed to exclude up to $737,000 from the mark-to-market gain upon expatriation. This amount has been bumped up from $725,000 in 2019.

Inflation Adjustments Relating to US Citizens Living Abroad:

  • Code § 911(b)(2)(D)(i): For 2020, foreign earned income exclusion for US citizens living and working abroad has been bumped up to $107,600, from $105,900 in 2019.

Inflation Adjustments Relating to Gift Tax:

  • Code § 2523(i): For 2020, the amount of the annual gift tax exclusion for gifts to non-citizen spouses has been bumped up to $157,000 from $155,000 in 2019. However, the amount of the annual gift tax exclusion for gifts to any person has remained the same at $15,000.
  • Code § 6039F: For 2020, gifts greater than $16,649 from foreign corporations and foreign partnerships will require reporting to the IRS. This amount is bumped up from $16,388 in 2019.

Disclosure of gifts and bequests from non-resident aliens and foreign estates is required when they exceed $100,000.

If you have any questions about how the 2020 inflation adjustments might impact you, please contact us.

By Amina Ahmad, CPA