Key Retirement and Tax Numbers for 2021

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Posted on February 2nd, 2021

Every year, the Internal Revenue Service announces cost-of-living adjustments that affect contribution limits for retirement plans and various tax deduction, exclusion, exemption, and threshold amounts. Here are a few of the key changes for 2021.

Employer Retirement Plan Contribution Limits

There are limits on how much can be deferred or contributed to workplace retirement plans. Benefits can also not exceed certain limits.

IRA Contribution Limits

The combined annual limit on contributions to traditional and Roth IRAs is $6,000 in 2021. Individuals age 50 and older are able to contribute an additional $1,000.

A deduction to a Traditional IRA is allowed in full if you (and your spouse, if you are married) are not covered by a retirement plan at work.

The limit on contributions to a Roth IRA begins to phases out after hitting certain modified adjusted gross income (MAGI) ranges. For individuals who are covered by a workplace retirement plan, the deduction for contributions to a traditional IRA also phase out for certain MAGI ranges.

The limit on non-deductible contributions to a traditional IRA is not subject to a phase-out based on MAGI.

Standard Deduction

A taxpayer can generally choose to itemize certain deductions or claim a standard deduction on the federal income tax return.

In 2021, the standard deduction is:

  • $12,550 (up from $12,400 in 2020) for single filers or married individuals filing separate returns
  • $25,100 (up from $24,800 in 2020) for married individuals filing joint returns
  • $18,800 (up from $18,650 in 2020) for heads of households

The additional standard deduction amount for the blind or aged (age 65 or older) in 2021 is:

  • $1,700 (up from $1,650 in 2020) for single filers and heads of households
  • $1,350 (up from $1,300 in 2020) for all other filing statuses

Special rules apply if you can be claimed as a dependent by another taxpayer.

Estate, Gift, and Generation-Skipping Transfer Tax

  • The annual gift tax exclusion (and annual generation-skipping transfer tax exclusion) for 2021 is $15,000, the same as in 2020.
  • The gift and estate tax basic exclusion amount (and generation-skipping transfer tax exemption) for 2021 is $11,700,000, up from $11,580,000 in 2020.

Kiddie Tax: Child’s Unearned Income

Under the kiddie tax, a child’s unearned income above $2,200 in 2021 (the same as in 2020) is taxed using the parents’ tax rates.


Source: irs.gov

Source: Broadridge