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    2021 Cost of Living Adjustments

    Posted by Steve Hood on Nov 17, 2020 10:43:43 AM

    Get prepared for 2021! Check out the cost of living adjustments and see how you will be affected.

    New IRA Income Eligibility Rate for 2021

    Income Phase-Out Ranges determine Eligibility to make deductible contributions to Traditional IRA accounts:

    Traditional IRA phase-out ranges

    • $66,000 to $76,000 - Single taxpayers covered by workplace retirement plan.
    • $105,000 to $125,000 - Married Couples Filing Jointly. This applies when the spouse making the IRA contribution is covered by a workplace retirement plan.
    • $198,000 to $208,000 – A taxpayer not covered by a workplace retirement plan married to someone who is covered
    • $0 to $10,000 - Married Filing Separately

    Income Phase-Out Ranges for Taxpayers making contributions to a Roth IRA accounts:

    • $125,000 to $140,000 - Single taxpayers and Heads of Household
    • $198,000 to $208,000 - Married Couples Filing Jointly
    • $0 to $10,000 - Married Filing Separately

    Income limits for Saver's Credit, also called Retirement Savings Contributions Credit

    • $66,000 – Married, filing jointly.
    • $49,500 – Head of household.
    • $33,000 – Singles and married individuals filing separately

    Education and Child-Related Breaks

    The American Opportunity Credit- Phase out ranges for this education (maximum $2,500 per eligible student) remain the same for 2021: $160,000 - $180,000 for joint filers and $80,000 - $90,000 for all other filers

    The Lifetime Learning Credit - The phaseout ranges for this education credit (maximum $2,000 per tax return) increase for 2021. They are $119,000-$139,000 for joint filers and $59,000-$69,000 for other filers — up $1,000 for joint filers, but the same as 2020 for others

    The adoption credit - The phaseout ranges for eligible taxpayers adopting a child will also increase for 2021 — by $2,140 to $216,660-$256,660 for joint, head-of-household and single filers. The maximum credit increases by $140, to $14,440 for 2021.

    Gift and Estate Taxes

    The unified gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption are both adjusted annually for inflation. For 2021, the amount is $11.7 million (up from $11.58 million for 2020).

    The annual gift tax exclusion remains at $15,000 for 2021. It is adjusted only in $1,000 increments, so it typically increases only every few years. (It increased to $15,000 in 2018.)

    Retirement Plans

    Not all of the retirement-plan-related limits increase for 2021. Thus, you may have limited opportunities to increase your retirement savings if you have already been contributing the maximum amount allowed:

    Type of Limitations 2021

    Please feel free to reach out to Brixey & Meyer to help navigate 2021. You can simply comment below, visit our website or call us at 866.760.0940. 

    Topics: ohio, year-end planning, Tax, Tax Team, Tax updates, workplace productivity, Management, New Year, 2021

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