Wolters Kluwer Projects Annual Inflation Amounts for 2021

14 September 2020

Annual inflation-adjusted amounts for tax year 2021 are projected by Wolters Kluwer. The projected amounts include 2021 tax brackets, the standard deduction, and alternative minimum tax amounts, among others. The projected amounts are based upon Consumer Price Index figures released by the U.S. Department of Labor on September 11, 2020.

The Tax Cuts and Jobs Act of 2017 (TCJA) (P.L. 115-97) mandated a change from the Consumer Price Index for All Urban Consumers (CPI-U) to the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). Official amounts for 2021 should be released by the IRS later in 2020.

Individual Tax Brackets

The projected bracket ranges for individuals in 2021 are as follows.

For married taxpayers filing jointly:

  • The 10% bracket applies to taxable incomes up to $19,900
  • The 12% bracket applies to taxable incomes over $19,900 and up to $81,050
  • The 22% bracket applies to taxable incomes over $81,050 and up to $172,750
  • The 24% bracket applies to taxable incomes over $172,750 and up to $329,850
  • The 32% bracket applies to taxable incomes over $329,850 and up to $418,850
  • The 35% bracket applies to taxable incomes over $418,850 and up to $628,300
  • The 37% bracket applies to taxable incomes over $628,300

For heads of households:

  • The 10% bracket applies to taxable incomes up to $14,200
  • The 12% bracket applies to taxable incomes over $14,200 and up to $54,200
  • The 22% bracket applies to taxable incomes over $54,200 and up to $86,350
  • The 24% bracket applies to taxable incomes over $86,350 and up to $164,900
  • The 32% bracket applies to taxable incomes over $164,900 and up to $209,400
  • The 35% bracket applies to taxable incomes over $209,400 and up to $523,600
  • The 37% bracket applies to taxable incomes over $523,600

For unmarried taxpayers:

  • The 10% bracket applies to taxable incomes up to $9,950
  • The 12% bracket applies to taxable incomes over $9,950 and up to $40,525
  • The 22% bracket applies to taxable incomes over $40,525 and up to $86,375
  • The 24% bracket applies to taxable incomes over $86,375 and up to $164,925
  • The 32% bracket applies to taxable incomes over $164,925 and up to $209,425
  • The 35% bracket applies to taxable incomes over $209,425 and up to $523,600
  • The 37% bracket applies to taxable incomes over $523,600

For married taxpayers filing separately:

  • The 10% bracket applies to taxable incomes up to $9,950
  • The 12% bracket applies to taxable incomes over $9,950 and up to $40,525
  • The 22% bracket applies to taxable incomes over $40,525 and up to $86,375
  • The 24% bracket applies to taxable incomes over $86,375 and up to $164,925
  • The 32% bracket applies to taxable incomes over $164,925 and up to $209,425
  • The 35% bracket applies to taxable incomes over $209,425 and up to $314,150
  • The 37% bracket applies to taxable incomes over $314,150

For estates and trusts:

  • The 10% bracket applies to taxable incomes up to $2,650
  • The 24% bracket applies to taxable incomes over $2,650 and up to $9,550
  • The 35% bracket applies to taxable incomes over $9,550 and up to $13,050
  • The 37% bracket applies to taxable incomes over $13,050

Standard Deduction

For 2021, the following standard deduction amounts are projected to apply:

  • For married taxpayers filing jointly, $25,100
  • For heads of households, $18,800
  • For unmarried taxpayers and well as married taxpayers filing separately, $12,550

AMT Exemptions

For 2021, the AMT exemption amounts are projected to be:

  • For married taxpayers filing jointly, $114,600
  • For unmarried individuals and heads of households, $73,600
  • For married taxpayers filing separately, $57,300

Estate and Gift Tax

The following amounts related to transfer taxes (estate, generation-skipping, and gift taxes) are projected for 2021:

 

  • The gift tax annual exemption is projected to be $15,000.
  • The estate and gift tax applicable exclusion (increased under TCJA) is projected to be $11,700,000 for decedents dying in 2021.

 

  • The exclusion for gifts made in 2021 to a spouse who is not a U.S. citizen is projected to be $159,000.

Other Amounts

The following other amounts are also projected for 2021:

  • The adoption credit for 2021 is projected to be $14,440 for 2021
  • For 2021, the allowed Roth IRA contribution amount is projected to phase out for married taxpayers filing jointly with income between $198,000 and $208,000. For heads of household and unmarried filers, the projected phaseout range is between $125,000 to $140,000.
  • The maximum amount of deductible contributions that can be made to an IRA is projected to be $6,000 for 2021. The increased contribution amount for taxpayers age 50 and over will, therefore, be $7,000.
  • The above-the-line deduction for traditional IRA contributions is projected to begin to phase out for married joint filers whose income is greater than $105,000 if both spouses are covered by a retirement plan at work. If only one spouse is covered by a retirement plan at work, the phaseout is projected to begin when modified adjusted gross income reaches $198,000. For heads of household and unmarried filers who are covered by a retirement plan at work, the 2021 income phaseout range for deductible IRA contributions is projected to begin at $66,000.
  • For 2021, the $2,500 student loan interest deduction is projected to begin to phase out for married joint filers with modified adjusted gross income (MAGI) above $140,000. For single taxpayers, the 2021 deduction is projected to begin to phase out at a MAGI level of over $70,000.
  • The amount of the 2021 foreign earned income exclusion under Code Sec. 911 is projected to be $108,700.