2021 Tax Update

Tax rates change annually. These are the updates for 2021.

2021 income tax brackets

For unmarried individuals, taxable income over….

$1	10%
$9,950	12%
$40,525	22%
$86,375	24%
$164,925	32%
$209,425	35%
$523,600	37%

For married individuals filing joint returns, taxable income over…

$1	10%
$19,900	12%
$81,050	22%
$172,750	24%
$329,850	32%
$418,850	35%
$628,300	37%

For heads of households, taxable income over…

$1	10%
$14,200	12%
$54,200	22%
$86,350	24%
$164,900	32%
$209,400	35%
$523,600	37%

2021 Long-term capital gains rates

For unmarried individuals, taxable income over…

$1	0%
$40,400	15%
$200,000	18.8%*
$445,850	23.8%*

For married individuals filing joint returns, taxable income over…

$1	0%
$80,000	15%
$250,000	18.8%*
$501,600	23.8%*

For heads of household, taxable income over…

$1	0%
$54,100	%15
$200,000	18.8%*
$473,750	23.8%*

2021 IRA contribution limits

Under age 50	$6,000
Age 50 or over	$7,000

Depending upon whether or not you and your spouse have a retirement plan at work, your IRA contribution may not be tax deductible and a Roth contribution might not be possible. See hereafter.

2021 Traditional IRA deductible contribution income limits

Covered by a plan at work…

Single or Head of Household…	….and your Modified AGI is…	…then you can take…
	$66,000 or less	full deduction
	in between	partial deduction
	$76,000 or more	no deduction
Married filing jointly or qualifying widower…	…and your Modified AGI is…	…then you can take…
	$105,000 or less	partial deduction
	in between	partial deduction
	$125,000 or more	no deduction

Not covered by a plan at work…

Single, Head of Household or Qualifying Widower	Regardless of your income…	…you can take a full deduction
Married with a spouse who does not have a plan at work	Regardless of your income…	…you can take a full deduction
Married with a spouse who does have a plan at work …	…and your Modified AGI is…	…then you can take…
	$198,000 or less	full deduction
	in between	partial deduction
	$208,000 or more	no deduction

2021 Roth IRA contribution income limits

Roth IRA contributions, but not Roth conversions, are limited by income.

2020 income	Single	Married Filing Jointly
May make a full Roth contribution	$125,000 or less	$198,000 or less
Contribution gradually reduced	in between	in between
Not eligible	$140,000 or more	$208,000 or more

2021 SEP and Simple IRA contribution limits

SEP IRAs and Simple IRAs allow larger contributions than IRAs, but as discussed in the book, require rules to be followed.

SEP	$58,000
Simple	$13,500

2021 401k contribution limits

Employee	$19,500
Max including employer	$58,000
If you are over age 50, add the “catch up” amount	$6,500
Highly-compensated employee, income above	$130,000

2021 estate tax exemption

Unmarried individuals	$11.7 million
Married couples	$23.4 million

2021 Social Security and Medicare Taxes

These are also called FICA taxes, or payroll taxes.

Maximum earnings subject to Social Security Tax (OASDI):	$142,800
OASDI tax rate	12.4%
Max earnings subject to Medicare tax	no cap
Medicare tax rate	2.9%

2021 HSA, HRA and FSA

Health savings accounts, health reimbursement accounts and flexible spending accounts; here are the contribution limits for 2021.

HSA annual contribution individual	$3,600
HSA annual contribution family	$7,200
HSA over age 55 catch-up	$1,000
QSEHRA annual contribution limit individual	$5,300
QSEHRA annual contribution limit family	$10,700
FSA contribution limit	$2,750
Dependent care FSA contribution limit	$5,000