The Child and Dependent Care Tax Credit was permanently extended for taxable years starting in 2013 and remained under tax reform. In 2021 a nonrefundable (i.e., only those with tax liability will benefit) credit of up to $14,440 is available for qualified adoption expenses for each eligible child. As such, you can no longer deduct on Schedule A expenses related to tax preparation, moving (except for members of the Armed Forces on active duty who move because of a military order), job hunting, or unreimbursed employee expenses such as tools, supplies, required uniforms, travel, and mileage.īusiness owners are not affected and can still deduct business-related expenses on Schedule C. Miscellaneous deductions that exceed 2 percent of AGI (adjusted gross income) are eliminated for tax years 2018 through 2025. For individuals whose income is at or above $445,850 ($501,600 married filing jointly), the rate for both capital gains and dividends is capped at 20 percent. For example, taxpayers whose income is below $40,400 for single filers and $80,800 for married filing jointly pay 0% capital gains tax.
In 2021 tax rates on capital gains and dividends remain the same as 2020 rates (0%, 15%, and a top rate of 20%) however, taxpayers should be reminded that threshold amounts don't correspond to the tax bracket rate structure as they have in the past. The term "taxable year" as it applies to FSAs refers to the plan year of the cafeteria plan, which is typically the period during which salary reduction elections are made. Pease and PEP (Personal Exemption Phaseout)īoth Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) have been eliminated under TCJA.Ī Flexible Spending Account (FSA) is limited to $2,750 per year in 2021 (same as 2020) and applies only to salary reduction contributions under a health FSA. The annual exclusion for gifts is $15,000.įor 2021, exemption amounts increased to $73,600 for single and head of household filers, $114,600 for married people filing jointly and for qualifying widows or widowers, and $57,300 for married taxpayers filing separately. In 2021 there is an exemption of $11.70 million per individual for estate, gift, and generation-skipping taxes, with a top tax rate of 40 percent.
As a reminder, while the tax rate structure remained similar to prior years under tax reform (i.e., with seven tax brackets), the tax-bracket thresholds increased significantly for each filing status.
In 2021 the top tax rate of 37 percent affects individuals whose income exceeds $518,400 ($628,300 for married taxpayers filing a joint return). The additional standard deduction for blind people and senior citizens in 2021 is $1,350 for married individuals and $1,700 for singles and heads of households. For singles and married individuals filing separately, it is $12,550, and for heads of household, the deduction is $18,800. The standard deduction for married couples filing a joint return in 2021 is $25,100. Personal exemptions are eliminated for tax years 2018 through 2025. As we close out the year and get ready for tax season, here's what individuals and families need to know about tax provisions for 2021.