2020 has been a rough year, so we can all use a bit of good news. While it’s not a huge adjustment, the IRS recently announced more than 60 tax provision adjustments, including standard deductions, tax rate schedules and a variety of others too. Keep in mind these are for the 2021 tax year though, so it won’t impact your 2020 tax bill.
Here are the highlights:
- Standard deduction
- Married couples filing jointly is increased to $25,100, up $300
- Single taxpayers and married individuals who file separately is increased to $12,550, up $150
- Heads of households is increased to $18,800, up $150
- Tax rates
- 37% for single taxpayers with incomes greater than $523,600 ($628,300 for married couples filing jointly)
- 35% for single taxpayers with incomes over $209,425 ($418,850 for married couples filing jointly)
- 32% for single taxpayers with incomes over $164,925 ($329,850 for married couples filing jointly)
- 24% for single taxpayers with incomes over $86,375 ($172,750 for married couples filing jointly)
- 22% for single taxpayers with incomes over $40,525 ($81,050 for married couples filing jointly)
- 12% for single taxpayers with incomes over $9,950 ($19,900 for married couples filing jointly)
- 10% for single taxpayers with incomes of $9,950 or less ($19,900 for married couples filing jointly)
- The personal exemption remains 0 per the Tax Cuts & Jobs Act.
- The fee for failing to file a tax return within 60 days of the due date is $435 (an increase of $330) or 100% of the amount of tax due, whichever is less.
- There is still no limit on itemized deductions in 2021 due to the Tax Cuts & Jobs Act.
- The Alternative Minimum Tax (AMT) exemption amount for 2021 is up slightly from $72,900 to $73,600 and starts to phase out at $523,600 ($114,600 for married couples filing jointly and starts to phase out at $1,047,200).
- 2021 maximum Earned Income Tax Credit increased from $6,660 to $6,728 for taxpayers who have three or more qualifying children.
- The adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $119,000, up from $118,000.
- The foreign earned income exclusion increased from $107,600 to $108,700.
- The estates of those who die in 2021 have a basic exclusion amount of $11,700,000, up from $11,580,000 in 2020.
There were other changes as well, but these are the ones that apply to most people. As we are about to enter November, now is a good time to do some year-end tax planning too. Give us a call to schedule an appointment or to ask any questions you may have.