Key Retirement & Tax Numbers for 2021
May 13, 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 adjustments for 2021.
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.
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.
IRAs
The combined annual limit on contributions to traditional and Roth IRAs is $6,000 in 2021 (the same as in 2020), with individuals age 50 and older able to contribute an additional $1,000. The limit on contributions to a Roth IRA phases out for 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 phases out for certain MAGI ranges. (The limit on nondeductible contributions to a traditional IRA is not subject to phase-out based on MAGI.)
MAGI Ranges: Contributions to a Roth IRA
2020
- Single/Head of household: $124,000 – $139,000
- Married Filing Jointly: $196,000 – $206,000
- Married Filing Separately: $0 – $10,000
2021
- Single/Head of household: $125,000 – $140,000
- Married Filing Jointly: $198,000 – $208,000
- Married Filing Separately: $0 – $10,000
MAGI Ranges: Contributions to a Traditional IRA
2020
- Single/Head of household: $65,000 – $75,000
- Married Filing Jointly: $104,000 – $124,000
2021
- Single/Head of household: $66,000 – $76,000
- Married Filing Jointly: $105,000 – $125,000
The 2021 phaseout range is $198,000 – $208,000 (up from $196,000 – $206,000 in 2020) when the individual making the IRA contribution is not covered by a workplace retirement plan but is filling jointly with a spouse who is covered. The phaseout range is $0 – $10,000 when the individual is married filling separately and either spouse is covered by a plan.
Employer Retirement Plans
- Employees who participate in 401(k), 403(b), and most 457 plans can defer up to $19,500 in compensation in 2021 (the same as in 2020); employees age 50 and older can defer up to an additional $6,500 in 2021 (the same as in 2020).
- Employees participating in a SIMPLE retirement plan can defer up to $13,500 in 2021 (the same as in 2020), and employees age 50 and older can defer up to an additional $3,000 in 2021 (the same as 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.
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