In case you missed it, the 2021 Tax Brackets are out in the US. If you didn’t know, the IRS increases tax brackets yearly to account for inflation to ensure we pay taxes on our earned income. 2021 is right around the corner, here is some information from the IRS to help you be ready for what’s in store.
Tax Brackets for income earned in 2021
- 37% for incomes over $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)
- 10% for incomes up to $9,950 ($19,900 for married couples filing jointly)
Married filing separately pay at same rate as unmarried. Source: Internal Revenue Service »
Tax Brackets for income earned in 2020
- 37% for incomes over $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)
- 10% for incomes up to $9,875 ($19,750 for married couples filing jointly)
Married filing separately pay at same rate as unmarried. Source: Internal Revenue Service »
Want to make sure you’re clear that whichever tax bracket is yours, you pay federal tax on a sliding scale. In 2020, the first $9875 of taxable income earned pays 10%, between $9876 and $40, 125 pays 12% – this applies up the income ladder!
Also note that the standard deduction goes up for single filers in 2021, to $12,550 (plus $150 from 2020). The standard deduction for couples filing jointly will be $25,100 in 2021, up $300 from 2020.
Single filers age 65 and older can increase the standard deduction by $1,700. Each joint filer 65 and over can increase the standard deduction by $1,350 apiece, so $2,700 total if both joint filers are 65-plus. Depending on the amount of tax deductions you have will help you understand if is a benefit to itemize your return, vs taking the standard deduction. It’s highly encouraged to confer with a tax specialist, if you are unclear about the best way to proceed.
This year has been rough on us, on cities and states. For additional details on tax inflation adjustments for tax year 2021, here is the IRS website to check about issues pertaining to you: https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2021
For those self employed or owners of a small business, here is the IRS link for deducting business expenses: https://www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses
Before we know it 2021 will be here! When you’re ready to talk about taking care of business at home and work, contact me via Email or check out the website @ The Living Planner for additional information. Let me know if there are other ways I may be of assistance.
Stay well –Lynn
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