2021 Tax Fact Sheet

Jan 20, 2021 • Written by Paul Staib | Certified Financial Planner (CFP®), MBA, RICP®

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2021 Tax Planning

The year 2020 brought seismic changes to our lives in most important respects. But as 2021 dawns, the changes to the tax code are more evolutionary than revolutionary. Of course, Congress could make more significant changes this year, and if so, they could be retroactive to the beginning of the year. But as of right now, most of the changes amount to tweaks to income or contribution limits, reflective of the effects of inflation in various provisions within the tax code.

As the new year dawns, here are key tax-related data points to have on your radar for the year ahead.

2021 Important Tax Facts for All Taxpayers
Income Tax Brackets: Seven tax brackets remain, but the specific parameters have changed, as follows (MFJ = married couples filing jointly):

  • 10%: Single income between $0 – $9,950; MFJ income between $0 – $19,900.
  • 12%: Single income between $9,951 – $40,525; MFJ income between $19,901 – $81,050.
  • 22%: Single income between $40,526 – $86,375; MFJ income between $81,051 – $172,750.
  • 24%: Single income between $86,376 – $164,925; MFJ income between $172,751 – $329,850.
  • 32%: Single income between $164,926 – $209,425; MFJ income between $329,851 – $418,850.
  • 35%: Single income between $209,426 – $523,600; MFJ income between $418,851 – $628,300.
  • 37%: Single income of $523,601 or more; MFJ income of $628,301 or more.

Standard Deduction: Standard deduction amounts are increasing slightly in 2021, to $12,550 for individuals and $25,100 for married couples filing jointly

AMT-Exempt Amounts: The exemption amounts for the alternative minimum tax are increasing slightly in 2021, to $73,600 for single filers and $114,600 for married couples filing jointly. The exemption amounts phase out for single filers with alternative minimum taxable incomes of less than $523,600, and $1,047,200 for married couples filing jointly

Estate/Gift Tax Exemption: This amount is increasing slightly, to $11.7 million per individual. The annual gift-tax exclusion amount stays the same at $15,000. (Note that annual gifts in excess of this amount do not automatically trigger any sort of gift tax. Most people won’t owe estate or gift taxes in their lifetimes under current tax laws.)

2021 Important Tax Facts for Investors
Qualified Dividend and Long-Term Capital Gains Rates:  Three rates are still in place for dividends and long-term capital gains – 0%, 15%, and 20% – but they don’t map perfectly by tax bracket as they did in the past. Here are the parameters for each of the rates.

  • 0%: Single income between $0 – $40,400; MFJ with income between $0 – $80,800.
  • 15%: Single income between $40,401 – $445,850; MFJ income between $80,801 – $501,600.
  • 20%: Single income over $445,850; MFJ income over $501,600.

Medicare Surtax:  As in years past, an additional 3.8% Medicare surtax will apply to the lesser of net investment income or the excess of modified adjusted gross income over $200,000 for single taxpayers and $250,000 for married couples filing jointly.

IRA contribution limits (Roth or traditional): $6,000 under age 50; $7,000 over age 50.

Income limits for deductible IRA contribution, single filers or married couples filing jointly who aren’t covered by a retirement plan at work: None; fully deductible contribution.

Income limits for deductible IRA contribution, single filers covered by a retirement plan at work:  Modified adjusted gross income under $66,000 – fully deductible contribution; between $66,000 and $76,000 – partially deductible contribution; more than $76,000 – contribution not deductible.

Income limits for deductible IRA contribution, married couples filing jointly who are covered by a retirement plan at work:  Modified adjusted gross income under $105,000 – fully deductible contribution; between $105,000 and $125,000 – partially deductible contribution; more than $125,000 – contribution not deductible.

Income limits for deductible IRA contributions, married couples filing jointly, if the spouse making the contribution isn’t covered by a retirement plan at work but his/her spouse is: Modified adjusted gross income under $198,000 – fully deductible contribution; between $198,000 and $208,000 – partially deductible contribution; more than $208,000 – contribution not deductible.

Income limits for nondeductible IRA contributions: None.

Income limits for IRA conversions: None.

Income limits for Roth IRA contribution, single filers:  Modified adjusted gross income under $125,000 – full Roth contribution; between $125,000 and $140,000 – partial Roth contribution; more than $140,000 – no Roth contribution.

Income limits for Roth IRA contribution, married couples filing jointly:  Modified adjusted gross income under $198,000 – full Roth contribution; between $198,000 and $208,000 – partial Roth contribution; more than $208,000 – no Roth contribution.

Contribution limits for 401(k), 403(b), 457 plans, or self-employed 401(k) (traditional or Roth): $19,500 under age 50; $26,000 for age 50 and older.

Total 401(k) contribution limits, including employer (pretax, Roth, after-tax) and employee contributions and forfeitures: $58,000 if under age 50; $64,500 if 50-plus.

SEP IRA contribution limit: The lesser of 25% of compensation or $58,000.

Saver’s Tax Credit, income limit, single filers: $33,000.

Saver’s Tax Credit, income limit, married couples filing jointly: $66,000.

Health savings account contribution limit, single contributor: $3,600 (under 55); $4,600 (55 and over).

Health savings account contribution limit, family coverage: $7,200 (under 55); $8,200 (55 and over).

High-deductible health plan out-of-pocket maximum, self-only coverage: $7,000.

High-deductible health plan out-of-pocket maximum, family coverage: $14,000.

Paul Staib | Certified Financial Planner (CFP®), MBA, RICP®

Paul Staib, Certified Financial Planner (CFP®), RICP®, is an independent Fee-Only financial planner. Staib Financial Planning, LLC provides comprehensive financial planning, retirement planning, and investment management services to help clients in all financial situations achieve their personal financial goals. Staib Financial Planning, LLC serves clients as a fiduciary and never earns a commission of any kind. Our offices are located in the south Denver metro area, enabling us to conveniently serve clients in Highlands Ranch, Littleton, Lone Tree, Aurora, Parker, Denver Tech Center, Centennial, Castle Pines and surrounding communities.

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