2021 Qualified Business Income Deduction Thresholds Filing Status 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). Qualified Business Income Deduction (Sec. 2021 Capital Gains Tax Rates & Brackets (Long-Term Capital Gains)įor Unmarried Individuals, Taxable Income Overįor Married Individuals Filing Joint Returns, Taxable Income Overįor Heads of Households, Taxable Income Over Long-term capital gains are taxed using different brackets and rates than ordinary income. Capital Gains Tax Rates (Long-Term Capital Gains) It is fully available and refundable to households with no income, unlike the Child Tax Credit’s former design. Half the credit will be advanced to families monthly, at $250/month for older children and $300/month for younger children, while the other half will be received on tax returns. The Child Tax Credit (CTC) is $3,000 for children 6 and older and $3,600 for children under 6. The American Rescue Plan Act (ARPA) enacted in March 2021 significantly expanded the Child Tax Credit in several ways. 2021 Earned Income Tax Credit Parameters Filing Status The credit for filers without qualifying children was significantly expanded for tax year 2021 in the American Rescue Plan Act (ARPA) enacted in March 2021. The maximum credit is $3,618 for one child, $5,980 for two children, and $6,728 for three or more children. The maximum Earned Income Tax Credit (EITC) in 2021 for single and joint filers is $1502, if the filer has no qualifying children (Table 5). 2021 Alternative Minimum Tax (AMT) Exemption Phaseout Thresholds Filing Status 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). 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).ĪMT exemptions phase out at 25 cents per dollar earned once taxpayer AMTI hits a certain threshold. 2021 Alternative Minimum Tax Exemptions Filing Status The AMT exemption amount for 2021 is $73,600 for singles and $114,600 for married couples filing jointly (Table 3).

The AMT is levied at two rates: 26 percent and 28 percent. However, this exemption phases out for high-income taxpayers. 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. The AMT uses an alternative definition of taxable income called Alternative Minimum Taxable Income (AMTI). The taxpayer then needs to pay the higher of the two. 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 Alternative Minimum Tax (AMT) was created in the 1960s to prevent high-income taxpayers from avoiding the individual income tax. The personal exemption for 2021 remains eliminated. The standard deduction for single filers will increase by $150 and by $300 for married couples filing jointly (Table 2). Take Survey Standard Deduction and Personal Exemption Please take our quick, anonymous survey, conducted in partnership with the University of North Carolina Tax Center. Help Us Learn More About How Americans Understand Their Taxes 2021 Federal Income Tax Brackets and Rates for Single Filers, Married Couples Filing Jointly, and Heads of Households Tax Rateįor Married Individuals Filing Joint Returns, Taxable Income 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. In 2021, the income limits for all tax brackets and all filers will be adjusted for inflation and will be as follows (Tables 1). 2021 Federal Income Tax Brackets and Rates Note that the Tax Foundation is a 501(c)(3) educational nonprofit and cannot answer specific questions about your tax situation or assist in the tax filing process. These inflation adjustments are for tax year 2021, for which taxpayers will file tax returns in early 2022. However, with the Tax Cuts and Jobs Act of 2017, the IRS now uses the Chained Consumer Price Index (C-CPI) to adjust income thresholds, deduction amounts, and credit values accordingly. The IRS used to use the Consumer Price Index (CPI) as a measure of inflation prior to 2018. This is done to prevent what is called “ bracket creep,” when people are pushed into higher income tax brackets or have reduced value from credits and deductions due to inflation, instead of any increase in real income. On a yearly basis the IRS adjusts more than 40 tax provisions for inflation.

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