Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
If you received a third-round, tax-free, Economic Impact Payment (EIP3) and your adjusted gross income is 2021 is less than it was in 2020 or 2019 (whichever year was used to figure the payment), you may be eligible for a recovery rebate credit.
You must include unemployment benefits you received in 2021 in your income. There is no exclusion for them.
| Taxable Income Threshold | 0% | 15% | 20% |
|---|---|---|---|
| Married Filing Jointly / 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% |
If you don't itemize your deductions you may still deduct charitable contributions to reduce your taxable income.
Here are the limits:
Note that individuals who itemize deductions can elect to deduct cash contributions up to 100% of adjusted gross income.
Distributions from qualified retirement plans and IRAs, which were waived for 2020, must commence for 2021 by those who attained the required starting date of who have inherited accounts.
COVID-19-related distributions may be repaid within 3 years. This means, a repayment in 2021 requires the filing of an amended return to recoup taxes paid on the 2020 distribution.
Educator expenses of up to $250 include the cost COVID-related personal protective gear and safety measures.
Note that the tuition and fees deduction expired at the end of 2020 and wasn't extended to a future year. The modified adjusted gross limits for the lifetime learning credit have been aligned with the limits for the American opportunity credit.
This deduction applies to sole proprietors, those who have an interest in a partnership, LLC, or S corporation. The taxable income amounts used to calculate the QBID have been adjusted for inflation. Keep in mind, the deduction up to 20% of qualified business income is a personal deduction and not a business deduction. It can be claimed even if you don't itemize.
For 2021, the adoption credit and the exclusion for employer-paid adoption assistance is $14.440. The benefit phaseout range is modified adjusted gross income between $216,660 to $256,660.
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:
For 2021, the child and dependent care credit is increased and fully refundable. Qualifying expenses taken into account in calculating the credit are $8,000 for one qualifying individual and $16,000 for two or ore qualifying individuals.
There's a two-tier phaseout of the credit based on income, with high-income individuals ineligible for any credit. The exclusion for dependent care under an employer's dependent care assistance plan is $10,500 ($5,250 if married filing separately).
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 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...
You may elect out of the additional first-year depreciation by attaching a statement to their and identifying the property's class that.
For a vehicle placed in service in 2021 and used over 50% for business, the first-year depreciation limit including bonus depreciation, is $18,200. If elect to opt out of using bonus depreciation, or you're not eligible for bonus depreciation, the fires-year depreciation limit is $10,200 (it excludes $8,000 bonus depreciation)
A high-deductible health plan is a prerequisite to funding an HSA. A high-deductible health care plan is a policy with a minimum deductible for 2021 of $1,400 for self-only coverage and a maximum out-of-pocket cap on co-payments and other amounts of $7,000. These limits are doubled for family coverage ($2,800/$14,000)
The contribution limit for 2021 is $3,600 for self-only coverage and $7,200 for family coverage. Those age 55 or older and not yet on Medicare can add an additional $1,000.
The adjusted gross income (AGI) brackets for the 10%, 20%, and 50% credits are increased for 2021. No credit is allowed when AGI exceeds $33,000 for single taxpayers, $49,500 for heads of households, and $66,000 for married persons filing jointly. Achieving a Better Life Experience (ABLE) account contributions can qualify for the credit.
The 2021 annual gift tax exclusion remains at $15,000 per donee for gifts of cash or present interests. The basic exemption amount for 2021 gift tax and estate tax purposes increases to $11,700,000. The top tax rate remains at 40%.
Note: A gift of present interest is one that the recipient is free to use, enjoy, and benefit from immediately without any strings attached. A future interest gift is where the recipient doesn't have complete use and enjoyment of it until some future time.
2021 AMT exemptions and exemption phaseout thresholds, and the dividing line between the 26% and 28% AMT brackets are adjusted for inflation. The 2021 AMT exemptions (prior to any phaseout) are $114,600 for married couples filing jointly and qualifying widows/widowers, $73,600 for single taxpayers and heads of households, and $57,300 for married persons filing separately.
The fine for filing late returns is higher for returns with post-2019 due dates. The minimum penalty for returns filed 60 or more days after the due date is now the lesser of $435 (up from $215) or 100% of the required tax shown on the return.
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.