With the 2020 tax season swiftly approaching, taxpayers will soon be receiving their tax returns to file. Just as importantly, new tax laws for 2021 will soon go into effect. From tax bracket rates to standard deduction amounts, High Five Taxes is here to help individuals and businesses navigate the information. Learn more about the new tax laws for 2021, and get in touch with our team to use our income tax preparation services.
Tax Brackets
While there are still seven tax brackets in 2021, the breakdown of those rates has changed. Tax rates in 2021 will be 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The top six brackets include a flat tax amount that varies from $995 to $168,993.50 depending on whether or not a taxpayer is filing individually, jointly, separately, or as the head of household.
Standard Deduction Amounts
Standard deduction amounts will increase for all filing statuses in 2021. Those filing as single or married couples filing separately will see an increase in standard deduction amounts to $12,550, heads of household will increase to $18,800, and married couples filing jointly will see an increase to $25,100.
In addition to these standard deduction amounts, the aged or blind will also receive an additional $1,350 standard deduction. If this taxpayer is filing individually, they can receive up to $1,700 in additional standard deductions.
Higher Contribution Limits for HSA Plans
You’ll be able to save more money if you have an HSA, or health savings account. The contribution limit for self-only coverage was raised from $3,500 to $3,550, while family coverage HSA contribution limits increased from $7,000 to $7,100.
High Contribution Limits For 401(k) Plans
Employees with 401(k) accounts will see an increase in their contribution limits this year as well. This amount will increase from $19,000 to $19,500. Taxpayers above the age of 50 who are eligible for catch-up contributions are also eligible for an additional $6,500, which is an increase from $6,000. This means that taxpayers over the age of 50 who have a 401(k) can contribute up to $26,000 to their retirement plan.
Itemized Deductions
In 2021, there will be various changes to itemized deductions when filing tax returns. Medical and dental expenses can only be deducted if they exceed 7.5% of your adjusted gross income or AGI. State and local taxes will remain in place and are limited to $10,000 combined or $5,000 for married couples filing separately. Casualty and theft losses have been repealed for itemized deductions. Miscellaneous deductions subject to a 2% floor have also been repealed in 2021, including job expenses. There are also no Pease limitations in 2021.
High Five Taxes Has You Covered
As 2021 approaches, make sure you’re prepared with a budget and savings plan with the help of High Fives Taxes’ income tax preparation services. There’s a lot more to navigate than just the laws mentioned here, so make sure you’re prepared. Contact one of our Tax Pros today to take advantage of our income tax preparation services that will keep you feeling confident about filing in 2022.
