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Major Tax Changes for 2021

Taxes • Accounting • Advisory • Assurance

Will the changes have any effect on your tax return?

Retirement/Pensions Plans

 

IRA: For year 2021, a qualified individual who would be at least 50 years old by the end of the tax year is allowed to make an additional “catch-up” contribution to a conventional or Roth IRA in the amount of $1,000. If a qualified individual will become 50 years old before the end of a calendar year, the individual’s age will be considered to be 50 as of January 1 of that tax year. For 2021, you could still be able to take a full IRA deduction if you were covered by a retirement plan and your 2021 modified AGI is less than $105,000 (married filing jointly or qualifying widow(er)), and $66,000 (single or head of household). A partial IRA deduction is allowed until your MAGI reaches $125,000 if married filing jointly, up to $76,000 if single or head of household, or up to $9,999 if married filing separately.

SIMPLE IRA: This type of plan may only be established by an employer that has 100 or fewer employees whereby each employee receives at least $5,000 in compensation in the preceding year. These are usually employer sponsored plans which may permit employee contributions. For 2021, an employee who will be at least 50 years old by the end of the tax year is able to make an additional “catch-up” contribution to a SIMPLE retirement plan in the amount of $3,000. The contribution limit to a SIMPLE IRA plan for the year 2021 is $13,500.

Elective Deferral 401(k): These are generally employer sponsored plans which may permit employee contributions. For 2021, an employee who will be at least age 50 by the end of the tax year is able to take an additional “catch-up” contribution to an elective deferral 401(k) retirement plan in the amount of $6,500.

Plan 2021 2020 2019
IRA Maximum Contribution Limit * $6,000 $6,000 $6,000
SIMPLE IRA Maximum Contribution * Limit $13,500 $13,500 $13,000
401(k) Maximum Contribution Limit* (elective deferral) $19,500 $19,500 $19,000

* Individuals who are 50 or older by the end of the year may make catch-up contributions as explained above. Other limits may apply.

 

Income Levels At Which Individuals Must File Tax Returns

 

Income Levels at Which Individuals Must File Tax Returns
The table below lists the income levels at which individuals have to file income tax returns (even though no tax is owed).

Filing Status 2021 2020 2019
Single < 65 $12,550 $12,400 $12,000
Single 65 or older $14,250 $14,050 $13,600
Married, filing separately $5.00 $5.00 $5.00
Married, filing jointly, both spouses < 65 $25,100 $24,800 $24,000
Married, filing jointly, one spouse 65 or older $26,450 $26,100 $25,300
Married, filing jointly, both spouses 65 or older $27,800 $27,400 $26,600
Head of Household < 65 $18,800 $18,650 $18,000
Head of Household, 65 or older $20,500 $20,300 $19,600
Qualifying Widow(er) < 65 with dep. child $25,100 $24,800 $24,000
Qualifying Widow(er) 65 or older with dep. child $26,250 $26,100 $25,300

The income-level test is applicable to gross income and not to adjusted gross income.

 

Mileage Rate for Use of Your Car

 

Business:
Under the standard mileage method, the taxpayer determines the amount of the allowable deduction by multiplying all of the business miles driven during the year by the standard mileage rate. The standard mileage rate method may be utilized by self-employed individuals or employees who own or lease a car and operate up to four cars at a time for commercial purposes.

Purpose 2021 2020 2019
Business 56 cents/mi. 57.5 cents/mi. 58 cents/mi.
Charitable 14 cents/mi. 14 cents/mi. 14 cents/mi.
Medical 16 cents/mi. 17 cents/mi. 20 cents/mi.
Moving 16 cents/mi. 17 cents/mi. 20 cents/mi.

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