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Tax Saving TIPs for 2021

Updated: Mar 13, 2022

The IRS has announced the tax year 2022 annual inflation adjustments. Click for Details

I bet you….right now, you want to know about Tax Year 2021 adjustments which apply to tax returns filed in 2022. right?

Let’s take a quick look at the changes for Tax Year 2021:

The tax items for tax year 2021 of greatest interest to most taxpayers include the following dollar amounts:

  • The standard deduction for married couples filing jointly for tax year 2021 rises to $25,100, up $300 from the prior year.

  • For single taxpayers and married individuals filing separately, the standard deduction rises to $12,550 for 2021, up $150

  • Heads of households, the standard deduction will be $18,800 for tax year 2021, up $150.

  • The personal exemption for tax year 2021 remains at ZERO (0), as it was for 2020; this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.

Marginal Tax Rates:

The marginal tax rate is the tax rate you pay on an additional dollar of income. In the United States, the federal marginal tax rate for individuals increases as income rises.

  • The top tax rate remains 37% for individual single taxpayers with incomes greater than $523,600 and $628,300 for married couples filing jointly.

  • The lowest rate is 10% for incomes of single individuals with incomes of $9,950 or less and $19,900 for married couples filing jointly.

Limit on Itemized Deductions – NONE: 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.

Other Important CREDITS and Exclusions

  • The maximum credit allowed for adoptions for tax year 2021 is the amount of qualified adoption expenses up to $14,440, up from $14,300 for 2020.

  • The tax year 2021 maximum Earned Income Credit amount is $6,728 for qualifying taxpayers who have three or more qualifying children, up from a total of $6,660 for tax year 2020.

  • The annual exclusion for gifts is $15,000 for calendar year 2021, as it was for calendar year 2020.

  • If a gift exceeds the annual $15,000 limit, that does not automatically trigger the gift tax. If a gift exceeds the annual exclusion limit, the difference is simply subtracted from the person’s lifetime exemption limit and no taxes are owed. Estates of decedents who die during 2021 have a gift and estate tax exclusion amount of $11,700,000, up from a total of $11,580,000 for estates of decedents who died in 2020. This means that unless you have an estate of almost 12 million dollars in 2021…you don’t have an estate tax problem. The IRS allows a person to give away up to $11.7 million in assets or property over the course of their lifetime and/or as part of their estate.

Get More Details on Tax Year 2021

Internal Revenue Service, “IRS provides Tax Inflation Adjustments for Tax Year 2021,” IR-2020-245, October 26, 2020

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