IRS Releases Inflation Adjustments for 2021

10.26.2020 | The IRS announced annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. The adjustments were announced in Revenue Procedure 2020-45.

The tax year 2021 adjustments are generally used on tax returns filed in 2022.

Here are the highlights:

• Marginal tax rates are unchanged for 2021, but brackets have been adjusted for inflation.

• Standard deductions have increased, by $300 to $25,100 if married filing jointly and by $150 to $12,550 if single. The personal exemption remains at zero.

• Various thresholds were also adjusted for inflation, including the thresholds for the foreign earned income exclusion, estate exclusion, and Lifetime Learning Credit.

• Various exemptions and limits were also adjusted, including the exemption for the Alternative Minimum Tax.

For complete details, check out the IRS announcement.