2021 Key Tax Numbers

Tax Year: 2021

• 2021 Social Security wage base is $142,800
• There is no earnings limit for the Medicare tax.
• You may owe an additional 0.9% Medicare tax if your earnings exceed a threshold (see below).
• Self-employed:
  • 2021 self-employment tax rate is 15.3%, which equals the Social Security rate of 12.4% plus the Medicare tax rate of 2.9%.
  • The 15.3% rate applies to earnings up to $142,800 after the earnings are reduced by 7.65% on Schedule SE.
  • The 2.9% Medicare rate applies to gross earnings from the first dollar. There is no earnings limit for the Medicare tax.
  • If an election was made in 2020 to defer one half of the Social Security portion of self-employment tax, then 50% of the deferred amount must be paid by December 31, 2021, and the remaining 50% becoming payable December 31, 2022.
  • One-half of the self-employment tax may be claimed on Schedule 1 of Form 1040 or 1040-SR (this an "above-the-line" deduction; you don't have to itemize your deductions to claim it).
• Additional 0.9% Medicare Tax on Earnings:
• High income taxpayers whose income exceeds a threshold amount are subject to an additional 0.9% Medicare Tax. Your filing status determines the threshold amount. If you're married and file a joint return, you must combine your and your spouse's wages, other compensation (i.e. tips, taxable fringe benefits, etc.) and self-employment income to determines if the threshold is exceeded.
• If in 2021 you had only self-employment earnings, and no wages, you figure your liability for the 0.9% tax on Part II of Form 8959.
• If you had wages and net earnings from self-employment in 2021:
  • first determine if the 0.9% tax applies to your wages in Part I of Form 8959
  • then reduce your threshold amount by your wages to get a reduced threshold amount that is used to determine if the tax applies to the self-employment income.
• A net loss from self-employment does not offset wages.
• The 50% deduction for self-employment tax does not apply to the 0.9% Additional Medicare Tax.

Threshold Amounts for the Additional 0.9% Medicare tax

Filing Status	Threshold
Married filing jointly	$250,000
Married filing separately	$125,000
Single	$200,000
Head of household	$200,000
Qualifying widow(er) with dependent child	$200,000

• Employer/Employee:
  • 2021 Total Social Security Rate: 12.4%
    • Employer share: 6.2% (maximum amount, $8,853.60)
    • Employee share: 6.2% (maximum amount, $8,853.60)
  • 2021 Total Medicare tax rate: 2.9%
    • Employer: 1.45% (regardless of wage amount)
    • Employee: 1.45% (regardless of wage amount)
    • Additional 0.9% Medicare tax:
      • See the chart above for threshold amounts to see if this additional tax applies to you.

Tax Year: 2021

You can no longer claim a personal exemption for yourself, your spouse or your dependents.

Tax Year: 2021

• Married filing Joint return: $25,100
• Qualifying widow/widower: $25,100
• Head of household: $18,800
• Single: $12,550
• Married filing separately: $12,550
• Dependents - minimum deduction: $1,100
• Additional Deduction if Age 65 or Older, or Blind.
  Note: If you turned 65 on January 1, 2022, you are considered to be 65 as of December 31, 2021 for purposes of claiming this deduction. The larger deduction for blindness is allowed regardless of age.
  • Married-per-spouse, filing jointly or separately:
    • $1,350 ($2,700 for age and blindness)
  • Qualifying widow/widower:
    • $1,350 ($2,600 for age and blindness)
  • Single or head of household:
    • $1,700 ($3,400 for age and blindness)

Tax Year: 2021

Taxable Income Threshold	0%	15%	20%
Married Filing Jointly	$1 - $80,800	$80,801 - $501,600	$501,601 and over
Surviving Spouse	$1 - $80,800	$80,801 - $501,600	$501,601 and over
Head of Household	$1 - $54,100	$54,101 - $473,750	$473,751 and over
Single	$1 - $40,400	$40,401 - $445,850	$445,851 and over
Married Filing Separately	$1 - $40,400	$40,401 - $250,800	$250,801 and over
Collectibles gain	maximum rate		28%
Unrecaptured Section 1250 gain on depreciated real estate	maximum rate		25%

Tax Year: 2021

• Business: 56 cents per mile
• Medical and moving for military personnel: 16 cents per mile:
  • This deduction only applies to members of the U.S. Armed Forces on active duty who move pursuant to a military order and incident to a permanent change of station.
• Charitable volunteers: 14 cents per mile

Tax Year: 2021

• Free parking, transit passes and van pooling: $270 per month

Tax Year: 2021

Traditional IRAs:

• Traditional IRA contribution limit: $6,000
• Additional contribution if age 50 or older: $1,000
• Deduction phaseout for active plan participant:
  • Single or head of household: $66,000 - $76,000
  • Married filing jointly, two participants: $105,000 - $125,000
  • Married filing jointly, one participant:
    • Participant spouse: $105,000 - $125,000
    • Non-participant spouse: $198,000 - $208,000
    • Married filing separately, live together, either participates:
      • $0 - $10,000
  • Married filing separately, live apart all year:
    • Participant spouse: $66,000 - $76,000
    • Non-participant spouse: no phaseout

Roth IRAs:

• Roth IRA contribution limit: $6,000
• Additional contribution if age 50 or older: $1,000
• Roth IRA Contribution limit phaseout range:
  • Single, head of household: $125,000 - $140,000
  • Married filing separately, live apart all year: $125,000 - $140,000
  • Married filing jointly, or qualifying widow/widower: $198,000 - $208,000
  • Married filing separately, live together at any time: $0 - $10,000

Tax Year: 2021

• 401(k), 403(b), 457 plans: $19,500
• Salary-reduction SEP: $19,500
• SIMPLE IRA: $13,500
• Additional contribution if age 50 or older (catch-up contributions):
  • 401(k), 403(b), governmental 457 and SEP plans: $6,500
  • SIMPLE IRA: $3,000

Tax Year: 2021

• American Opportunity credit limit-per student: $2,500
• Lifetime Learning credit limit-per-taxpayer: $2,000
• Phaseout of American Opportunity credit:
  • Married filing jointly: $160,000 - $180,000
  • Single, head of household, or qualifying widow/widower: $80,000 - $90,000
• Phaseout of Lifetime Learning credit:
  • Married filing jointly: $160,000 - $180,000
  • Single, head of household, qualifying widow/widower: $80,000 - $90,000
• Student loan interest deduction limit: $2,500
  • Phaseout of deduction limit:
    • Married filing jointly: $140,000 - $170,000
    • Single, head of household, qualifying widow/widower: $70,000-$85,000
• Coverdell ESA limit: $2,000
  • Phaseout of limit:
    • Married filing jointly: $190,000 - $220,000
    • All others: $95,000 - $110,000
  • Tuition and fees No Longer Allowed: Before 2021, you didn't have to itemize deductions to deduct tuition and fees for up to $2,000 or $4,000 of qualifying higher education the tuition and fees , subject to an income limitation. This deduction was repealed for years after 2020.

Tax Year: 2021

• Limit on premium allowed as medical expense:
  • Age 40 or under: $450
  • Over 40 but not over 50: $850
  • Over 50 but not over 60: $1,690
  • Over 60 but not over 70: $4,520
  • Over 70: $5,640

Tax Year: 2021

For qualifying property placed in service in 2021, first-year expensing is allowed up to a limit of $1,050,000. The limit begins to phase out if the total cost of qualifying property exceeds $2,620,000.

Section 179 Deduction Phase-out:

If the cost of qualifying property placed in service in 2021 is more than $2,620,000, you reduce the $1,050,000 expensing limit dollar-for-dollar for each dollar the cost of qualifying property exceeds $2,620,000 (but not below zero).

For example, if you place machinery in service during 2021 costing $2,700,000, the $1,050,000 deduction limit is reduced by $80,000 to $970,000 ($1,050,000) - ($2,700,000 - $2,620,000) which is entered on Form 4562 in Part 1, line 5 (Dollar limitation for tax year).

If the cost of the property was $3,670,000 or more, no first-year expensing deduction would be allowed for 2021 because it would be completely phased out.

2021 Bonus Depreciation (Section 168(k):

Bonus depreciation is an additional first-year depreciation allowance equal to a set percentage of the adjusted basis of eligible property. The percentage for bonus depreciation for 2021 is 100%. Bonus depreciation is fully deductible for alternative minimum tax purposes; no adjustment is required.

Bonus depreciation is also referred to as a "Section 168(k) allowance" and a "special depreciation allowance".

The Tax Cuts and Jobs Act increased the bonus depreciation percentage from 50% to 100% for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023.

This law change...

• generally, applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify, and.
• Adds film, television, live theatrical productions, and some used qualified property as types of property that may be eligible.

You may elect out of the additional first-year depreciation by attaching a statement to their and identifying the property's class that.

Tax Year: 2021

If you don't itemize your deductions you may still deduct charitable contributions to reduce your taxable income.

Here are the limits:

• Married filing jointly: Up to $600.
• Single filers: Up to $300

Note that individuals who itemize deductions can elect to deduct cash contributions up to 100% of adjusted gross income.

Tax Year: 2021

The 2021 child tax credit is up to $3,600 for a qualifying child from birth to under age 6 and up to $3,000 for a child age 6 but under age 18. The credit is refundable if its being claimed for a qualifying child.

You may claim a $500 nonrefundable credit for a qualifying dependent (a person that is not your qualifying child).

To claim the child tax credit, you must meet two conditions:

1. You must have a qualifying child or a qualifying dependent with a valid Social Security Number.
2. Your income must be below a set amount. To have the credit treated as refundable, you must meet a residency test. You or your spouse, if married, must have a principal place of abode in the U.S. for more than half of 2021 or are a bona fide resident of Puerto Rico for 2021.

Tax Year: 2021

The 2021 maximum EIC amount is $3,618 for one qualifying child, $5,980 for two qualifying children, $6,728 for three or more qualifying children, and $1,502 for taxpayers who have no qualifying child.

The IRS says it will delay issuing the earned income credit or the additional child tax credit until February 15. The reason is, the IRS wants some time to review the returns and reduce improper refund payments.