Tax Resources

2021 Federal Income Tax Brackets and Rates

In 2021, the income limits for all tax brackets and all filers will be adjusted for inflation and will be as follows (Tables 1). The top marginal income tax rate of 37 percent will hit taxpayers with taxable income of $523,600 and higher for single filers and $628,300 and higher for married couples filing jointly.

Rate

For Unmarried Individuals

For Married Individuals Filing Joint Returns

For Heads of Households

10%

Up to $9,950

Up to $19,900

Up to $14,200

12%

$9,951 to $40,525

$19,901 to $81,050

$14,201 to $54,200

22%

$40,526 to $86,375

$81,051 to $172,750

$54,201 to $86,350

24%

$86,376 to $164,925

$172,751 to $329,850

$86,351 to $164,900

32%

$164,926 to $209,425

$329,851 to $418,850

$164,901 to $209,400

35%

$209,426 to $523,600

$418,851 to $628,300

$209,401 to $523,600

37%

Over $523,600

Over $628,300

Over $523,600

Source: Internal Revenue Service

2021 Standard Deduction and Personal Exemption

The standard deduction for single filers will increase by $150 and by $300 for married couples filing jointly (Table 2).

The personal exemption for 2021 remains eliminated.

Filing Status

Deduction Amount

Single

$12,550

Married Filing Jointly

$25,100

Head of Household

$18,800

Source: Internal Revenue Source

2021 Standard Deduction

2021 Alternative Minimum Tax

The Alternative Minimum Tax (AMT) was created in the 1960s to prevent high-income taxpayers from avoiding the individual income tax. This parallel tax income system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two.

The AMT uses an alternative definition of taxable income called Alternative Minimum Taxable Income (AMTI). To prevent low- and middle-income taxpayers from being subject to the AMT, taxpayers are allowed to exempt a significant amount of their income from AMTI. However, this exemption phases out for high-income taxpayers. The AMT is levied at two rates: 26 percent and 28 percent.

The AMT exemption amount for 2021 is $73,600 for singles and $114,600 for married couples filing jointly (Table 3).

Filing Status

Exemption Amount

Unmarried Individuals

$73,600

Married Filing Jointly

$114,600

Source:  Internal Revenue Service

2021 Alternative Minimum Tax Exemptions

In 2021, the 28 percent AMT rate applies to excess AMTI of $199,900 for all taxpayers ($99,950 for married couples filing separate returns).

AMT exemptions phase out at 25 cents per dollar earned once taxpayer AMTI hits a certain threshold. In 2021, the exemption will start phasing out at $523,600 in AMTI for single filers and $1,047,200 for married taxpayers filing jointly (Table 4).

Filing Status

Threshold

Unmarried Individuals

$523,600

Married Filing Jointly

$1,047,200

Source: Internal Revenue Source

2021 Alternative Minimum Tax Exemption Phaseout Thresholds

2021 Earned Income Tax Credit

The maximum Earned Income Tax Credit in 2021 for single and joint filers is $543, if the filer has no children (Table 5). The maximum credit is $3,618 for one child, $5,980 for two children, and $6,728 for three or more children. All these are relatively small increases from 2020.

Filing Status

 

No Children

One Child

Two Children

Three or More Children

Single or Head of Household

Income at Max Credit

$7,100

$10,640

$14,950

$14,950

Maximum Credit

$543

$3,618

$5,980

$6,728

Phaseout Begins

$8,880

$19,520

$19,520

$19,520

Phaseout Ends (Credit Equals Zero)

$15,980

$42,158

$47,915

$51,464

Married Filing Jointly

Income at Max Credit

$7,100

$10,640

$14,950

$14,950

Maximum Credit

$543

$3,618

$5,980

$6,728

Phaseout Begins

$14,820

$25,470

$25,470

$25,470

Phaseout Ends (Credit Equals Zero)

$21,920

$48,108

$53,865

$57,414

Source: Internal Revenue Source

2021 Earned Income Tax Credit Parameters

2021 Child Tax Credit

The child tax credit totals at $2,000 per qualifying child and is not adjusted for inflation. However, the refundable portion of the Child Tax Credit is adjusted for inflation but will remain at $1,400 for 2021.

2021 Capital Gains Tax Rates & Brackets (Long-Term Capital Gains)

Long-term capital gains are taxed using different brackets and rates than ordinary income.

 

For Unmarried Individuals, Taxable Capital Gains Over

For Married Individuals Filing Joint Returns, Taxable Capital Gains Over

For Heads of Households, Taxable Capital Gains Over

0%

$0

$0

$0

15%

$40,400

$80,800

$54,100

20%

$445,850

$501,600

$473,750

Source: Internal Revenue Source

2021 Capital Gains Tax Rates & Brackets (Long-Term Capital Gains)

2021 Qualified Business Income Deduction (Sec. 199A)

The Tax Cuts and Jobs Act includes a 20 percent deduction for pass-through businesses against up to $164,900 of qualified business income for unmarried taxpayers and $329,800 for married taxpayers (Table 7).

Filing Status

Threshold

Unmarried Individuals

$164,900

Married Filing Jointly

$329,800

Source: Internal Revenue Source

2021 Qualified Business Income Deduction Thresholds

2021 Annual Exclusion for Gifts

In 2021, the first $15,000 of gifts to any person are excluded from tax. The exclusion is increased to $159,000 for gifts to spouses who are not citizens of the United States.

 

Source:  Taxfoundation.org