2021 Tax Inflation Adjustments

The IRS has released the 2021 tax inflation adjustments for more than 60 tax provisions. The income tax brackets, standard deduction amounts, and many other tax items are adjusted annually for cost-of-living increases. The tax year 2021 adjustments described below generally apply to tax returns filed in 2022.

Highlights

tax related actions2021 Standard Deduction

  • $25,100 for married individuals filing jointly and surviving spouses
  • $18,800 for heads of households
  • $12,550 for single individuals and married individuals filing separately

2021 Personal Exemption

  • Remains at 0, as it was for 2020; this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act

2021 Income Tax Brackets

  • 37% for individual single taxpayers with incomes greater than $523,600 ($628,300 for married couples filing jointly)
  • 35%, for incomes over $209,425 ($418,850 for married couples filing jointly)
  • 32% for incomes over $164,925 ($329,850 for married couples filing jointly)
  • 24% for incomes over $86,375 ($172,750 for married couples filing jointly)
  • 22% for incomes over $40,525 ($81,050 for married couples filing jointly)
  • 12% for incomes over $9,950 ($19,900 for married couples filing jointly)
  • 10% for incomes of single individuals with incomes of $9,950 or less ($19,900 for married couples filing jointly)

2021 Itemized Deductions

  • For 2021, as in 2020, 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act

2021 Alternative Minimum Tax Exemption

  • $114,600 for married individuals filing jointly and surviving spouses and begins to phase out at $1,047,200
  • $73,600 for single individuals and heads of households and begins to phase out at $523,600
  • $57,300 for married individuals filing separately and begins to phase out at $523,600
  • $25,700 for estates and trusts and begins to phase out at $85,650

2021 Maximum Earned Income Credit

  • $6,728 for qualifying taxpayers who have three or more qualifying children, up from a total of $6,660 for tax year 2020

2021 Limitation for The Qualified Transportation Fringe Benefit

  • For tax year 2021, the monthly limitation for the qualified transportation fringe benefit remains $270, as is the monthly limitation for qualified parking

2021 Contributions to Health Flexible Spending Arrangements

  • The dollar limitation for employee salary reductions for contributions to health flexible spending arrangements remains $2,750. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $550, an increase of $50 from taxable years beginning in 2020.

2021 Estate and Gift Tax

  • The gift tax exclusion is $15,000 per donee, or $159,000 for gifts to spouses who are not U.S. citizens
  • The federal estate tax exclusion is $11,700,000
  • The maximum reduction for real property under the special valuation method is $1,190,000

View Revenue Procedure 2020-45 for full details on the tax inflation adjustments.

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