Estate, Gift and Income Tax Amounts Increased for 2021

The IRS announced the annual inflation increases for various tax provisions, effective as of January 1, 2021.The lifetime estate and gift tax exemption increased to $11.7 million from $11.58 million. A couple can jointly exclude $23.4 million. The annual gift tax exclusion remains $15,000 for 2021.

The standard deduction for married couples filing jointly is $25,100 (up from $24,800).

For single taxpayers, it is $12,550 (up from $12,500). Remember, the personal exemption amount was eliminated for years after 2017.The top tax rate of 37% begins at taxable income exceeding $628,300 for married couples filing jointly ($523,600 for singles).

The 24% bracket begins with taxable income of $172,750 for married couples ($86,375 for singles). The 22% tax rate begins with taxable income of $81,050 for couples ($40,525 for singles).

The maximum annual tax-deferred contribution to 401(k)s and similar plans remains at $19,500. The catch-up contribution for those ages 50 and older remains at $6,500. Total contributions to 401(k) plans are limited to $58,000 ($57,000 in 2020).

The IRA contribution limit stays at $6,000. The contribution limit is the same for traditional and Roth IRAs. If you contribute to both types of IRAs, the aggregate contributions can’t exceed $6,000. The catch-up contribution for taxpayers age 50 and over isn’t indexed for inflation and remains at $1,000.