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The old adage that nothing is certain but death and taxes is only partially true. Yes, you can safely expect to pay taxes in 2021, but you almost certainly won’t see the same type of tax return thanks to a number of tax law changes that are to come.
That’s it: The Ultimate Guide to Financial Planning
Many changes are triggered by inflation, which means that the income limits for taking any allowance are rising.
Read on for information about the tax changes you need to plan your financial future.
Last updated: February 11, 2021
one-time submission
1. Tax brackets increase for all registration status
Your federal taxes are calculated based on the tax brackets for your enrollment status. These brackets are adjusted for inflation every year. Here are the minimum income levels for the top tax brackets for each enrollment status in 2021:
Single: $ 523,601 (up from $ 518,401 in 2020)
Head of household: $ 523,601 (up from $ 518,401 in 2020)
Married submission together: $ 628,301 (up from $ 622,051 in 2020)
Married registration separately: $ 314,150 (up from $ 311,026 in 2020)
Double Check: Any New Numbers You Need To Plan Taxes Ahead
Employer match
2. Increase employer-sponsored contribution limits for retirement
The contribution limit for elective forbearance at 401 (k), 403 (b), most 457 plans, and the federal government’s thrift plan remains at $ 19,500 for 2021, just as it was in 2020. The total amount that can be contributed up to a plan of You and your employer combined will grow from $ 57,000 to $ 58,000 in 2020. However, the catch-up contribution for taxpayers 50 and over is still $ 6,500.
Related Topics: 9 Smart Strategies to Maximize 401 (k) Posts
Studio shot of an egg with word gold.
3. Traditional IRA income restrictions on deducting contributions are increasing
The contribution limits for IRAs remain unchanged at $ 6,000 if you are under 50 and $ 7,000 if you are 50 or older. However, the IRS has announced some other tax changes that will affect the IRA in 2021. First, if you are covered by an employer-sponsored plan, your limit of earnings if you are still receiving a deduction for the increase in contributions.
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Individual filers: The maximum deduction will be reduced to $ 65,000 in 2021 (down from $ 64,000 in 2020) and eliminated entirely at $ 75,000 or more (down from $ 74,000).
Married submission together: The maximum deduction is reduced to $ 104,000 (down from $ 103,000 in 2020) and completely eliminated at $ 124,000 (down from $ 123,000).
If your spouse is insured but you are not, your maximum deduction will be reduced to $ 20,000 in 2021 (down from $ 196,000 in 2020) and eliminated at $ 208,000 (down from $ 206,000).
Learn: Roth vs. Traditional IRA: Which Retirement Plan Is Best For Me?
Joint filer
4. Income limits to contribute to a Roth IRA surge
Roth IRAs offer after-tax savings for retirement, but if your income is too high for the year, you are not allowed to contribute.
Individual filers: For 2021, if your Modified Adjusted Gross Income is $ 125,000 (down from $ 124,000 in 2020) and eliminated at $ 140,000 (down from $ 139,000), your maximum contribution will be reduced.
Common filers: Your maximum contribution will be reduced if your Modified Adjusted Gross Income is $ 198,000 (down from $ 196,000) and eliminated at $ 208,000 (down from $ 206,000).
Find Out: The Most Popular Things To Do With Your Tax Refund – And How To Make It Smarter
Married filing together
5. Standard deduction increases for all enrollment status
All taxpayers are entitled to the standard deduction unless they list their deductions. The 2021 standard prints The following applies to all login statuses:
Single: $ 12,550 (up from $ 12,400 in 2020)
Head of household: $ 18,800 (down from $ 18,650)
Married submission together: $ 25,100 (down from $ 24,800)
Married registration separately: $ 12,550 (versus $ 12,400)
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Single prints
6. There is still no limit on individual prints
If your Adjusted Gross Income was too high prior to 2018, there was a limit to the amount you could claim for certain individual deductions. With the passing of the Law on Tax Reductions and Employment, however, the restriction on individual deductions for the tax years 2018 to 2025 was lifted.
This means your individual deductions will still be available for things like charitable donations, taxes paid, interest paid, labor costs, and other miscellaneous allowances regardless of your income level. Once this provision expires in 2025, the limit on income-based individual deductions will be restored unless a new tax law is passed.
It is probably even more beneficial to take the standard deduction, as it doubled as you passed the TCJA.
Learn more about deductions: Best and Worst Ways to Breakdown Your Taxes
Joint filer
7. Personal exceptions remain unavailable
The value of a personal exemption was $ 4,150 in 2018. However, with the passage of the Tax Reduction and Employment Act, personal exemption was removed. For 2021, as in 2020, the personal exceptions will remain at zero.
Exemptions were previously used to reduce your taxable income. If there were exceptions, you could claim one per dependent including yourself, your spouse (if married and registered together), and anyone who qualified as additional dependents.
To compensate for the loss of personal exceptions, the standard deduction has been increased dramatically. Exceptions can return if tax laws change again. However, you cannot apply for a personal exemption for 2021.
Important: How to protect your tax refund from theft
Health savings account
8. The HSA contribution limits are increasing
With health savings accounts, you can save money for future medical expenses in a special tax-privileged account. In 2021, the amount you can stash increases to $ 3,600 for auto insurance (up from $ 3,550 in 2020) and to $ 7,200 for taxpayers with family insurance (up from $ 7,150).
Find Out: 9 Legal Tax Haven To Protect Your Money
Estate tax gift
9. Estate tax exemption limits increase; The limit values for the gift tax remain the same
In 2021, federal estate tax exemption will increase from $ 11.58 million in 2020 to $ 11.7 million. The annual gift tax exclusion – or the amount you can give to anyone before you claim any portion of the inheritance tax exemption (or owe gift taxes) – remains at $ 15,000, which is where it has been since 2018.
Related: What Is the Death Tax?
public transportation
10. The limit value for the ancillary services for transport remains the same
As a taxpayer, you will typically need to consider not only cash payments received from your employer, but any other benefits your employer pays on your behalf when reporting your taxable income to the IRS. However, there are certain exceptions called fringe benefits. For example, your employer may grant you transportation benefits of up to $ 270 each month in 2021, such as: B. free parking or a public transport pass without increasing your taxable income.
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Michael Keenan contributed to the coverage of this article.
This article originally appeared on GOBankingRates.com: Important Tax Changes For 2021 You Need To Know