Tax Law and News

IRS annual inflation adjustments for tax years 2020 and 2021

Written by Mike D'Avolio, CPA, JDNadia Rodriguez, CPA
Featuring Mike D'Avolio, CPA, JD, Nadia Rodriguez, CPA
Published Sep 24, 2021
4 min read

This chart outlines the year-over-year inflation adjustments on some higher impact provisions of the tax code. You can refer to these figures in planning for tax year 2021, and consider sharing with your individual and business tax clients. In addition, refer to the resources at the bottom of the article for additional adjustments.

	Tax year 2020	Tax year 2021
Standard deduction	Married filing jointly: $24,800 Single taxpayers and married individuals filing separately: $12,400 Heads of household: $18,650	Married filing jointly: $25,100 Single taxpayers and married individuals filing separately: $12,550 Heads of household: $18,800
Personal exemption	$0	$0
Tax rates and brackets	Top rate is 37% for individual single taxpayers with incomes greater than $518,400 ($622,050 for married couples filing jointly) 35% for incomes over $207,350 ($414,700 for married couples filing jointly) 32% for incomes over $163,300 ($326,600 for married couples filing jointly) 24% for incomes over $85,525 ($171,050 for married couples filing jointly) 22% for incomes over $40,125 ($80,250 for married couples filing jointly) 12% for incomes over $9,875 ($19,750 for married couples filing jointly) Lowest rate is 10% for incomes of single individuals with incomes of $9,875 or less ($19,750 for married couples filing jointly)	Top rate is 37% for individual single taxpayers with incomes greater than $523,600 ($628,300 for married couples filing jointly) 35% for incomes over $209,425 ($418,850 for married couples filing jointly) 32% for incomes over $164,925 ($329,850 for married couples filing jointly) 24% for incomes over $86,375 ($172,750 for married couples filing jointly) 22% for incomes over $40,525 ($81,050 for married couples filing jointly) 12% for incomes over $9,950 ($19,900 for married couples filing jointly) Lowest rate is 10% for incomes of single individuals with incomes of $9,950 or less ($19,900 for married couples filing jointly)
Alternative minimum tax exemption	$72,900, and begins to phase out at $518,400 $113,400 for married couples filing jointly, and begins to phase out at $1,036,800	$73,600, and begins to phase out at $523,600 $114,600 for married couples filing jointly, and begins to phase out at $1,047,200
Penalty for not maintaining minimum essential health coverage	$0	$0
Dollar limitation for employee salary reductions for contributions to health flexible spending arrangements	$2,700	$2,750
Adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit	$118,000	$119,000
Maximum credit allowed for adoptions	$14,300	$14,440
Foreign earned income exclusion	$107,600	$108,700
Basic exclusion amount for estates of decedents	Estates of decedents who die during 2020: $11,580,000	Estates of decedents who die during 2021: $11,700,000
Annual exclusion for gifts	$15,000	$15,000
Standard mileage rates for the use of a car (also vans, pickups or panel trucks)	57.5 cents/mile driven for business use 17 cents/mile driven for medical or moving purposes 14 cents/mile driven in service of charitable organizations	56 cents/mile driven for business use 176 cents/mile driven for medical or moving purposes 14 cents/mile driven in service of charitable organizations
Monthly limit on qualified transportation fringe benefits & qualified parking	$270	$270
Contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan	$19,500	$19,500
Catch-up contribution limit for employees age 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan	$6,500	$6,500
Limit on annual contributions to an IRA	$6,000	$6,000
Catch-up contribution limit for individuals aged 50 and over (IRA)	$1,000	$1,000
If, during the year, either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced or phased out until it is eliminated, depending on filing status and income	For single taxpayers covered by a workplace retirement plan, the phase-out range is $65,000 to $75,000 For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $104,000 to $124,000 For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000	For single taxpayers covered by a workplace retirement plan, the phase-out range is $66,000 to $76,000 For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $105,000 to $125,000 For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between:	$196,000 and $206,000	$198,000 and $208,000
Income phase-out range for taxpayers making contributions to a Roth IRA:	Singles and heads of household: $124,000 to $139,000 Married couples filing jointly: $196,000 to $206,000 Married individual filing a separate return who makes contributions to a Roth IRA and is not subject to an annual cost-of-living adjustment: $0 to $10,000	Singles and heads of household: $125,000 to $140,000 Married couples filing jointly: $198,000 to $208,000 Married individual filing a separate return who makes contributions to a Roth IRA and is not subject to an annual cost-of-living adjustment: $0 to $10,000
Income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers	Married couples filing jointly: $65,000 Heads of household: $48,750 Singles and married individuals filing separately: $32,500	Married couples filing jointly: $66,000 Heads of household: $49,500 Singles and married individuals filing separately: $33,500
SIMPLE retirement contribution limit	$13,500	$13,500

Resources:

Mike D’Avolio, CPA, JD, is a tax law specialist for Intuit® ProConnect™ Group, where he has worked since 1987. He monitors legislative and regulatory activity, serves as a government liaison, circulates information to employees and customers, analyzes and tests software, trains employees and customers, and serves as a public relations representative. More from Mike D'Avolio, CPA, JD

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