1. In regard to retirement plans, the maximum contribution limits
for 2021 are outlined below:
|
Traditional & Roth IRA's for Taxpayers under 50 | $
6,000 |
|
Traditional & Roth IRA's for Taxpayers over 50 | $ 7,000 |
| 401K's
for Taxpayers under 50 | $19,500 |
| 401K's
for Taxpayers over 50 | $26,000 |
| SEP
& Defined Contribution Plans for Taxpayers under 50 | $58,000 |
| SEP
& Defined Contribution Plans for Taxpayers over 50 | $58,000 |
2. For 2021 the IRS allows a deduction for your automobile at various rates depending on the
usage. The details are outlined below:
| Car
used for business | 56 cents per mile |
|
Car used for charitable purposes | 14 cents per mile |
|
Car used for medical or moving purposes | 16 cents per mile |
3. Child care tax credits for summer day camp and babysitters are still available for children under 13 years
of age if both parents work.
4. In regard to the "kiddie" tax the law increases the age
from 14 to 18 regarding investment income. If the child is under 25 and still in college and they have investment
income of over $2,200 they will be taxed at their parents' rate instead of the individual rate.
5. The
minimum corporate tax in New Jersey is based on gross receipts and ranges from $500 to $2,000 for 2021.
6.
The New Jersey Homestead rebates for a homeowner now range from $1,000 to $2,000 for 2021.
7. The
threshold for the deduction of unreimbursed medical expenses has been changed to 7.5% of your adjusted gross income.
8. The tax rate on dividend income is generally 15% for 2021. However, if in the top tax bracket
then the rate is 20%.
9. The maximum tax rate on capital gains is 15% for 2021 if your taxable
income is under $501,600 on a joint return. If over $501,600, the capital gain rate rises to 20%.
10. A
Medicare surtax of 0.9% will be assessed on W-2 employee compensation or self-employment income if you earn over
$250,000 on a joint return.
11. There is a 3.8% Medicare surtax on net investment
income if your modified adjusted gross income is over $250,000 on a joint return. Net investment income includes, interest,
dividends, capital gains, annuities, royalties and passive rental income. It does not include tax-free interest or distributions
from retirement plans and IRA's.
12. For flexible spending accounts (FSA) over the counter medications
are no longer eligible. In 2021, the maximum annual FSA contribution for each employee will be capped at $2,750.
13. Under the American Opportunity Tax Credit there is a $2,500 maximum credit for qualified higher education
expenses such as college. However the credit phases out for married couples earning over $160,000.
14. In
2021, there are no estate taxes at the federal level unless your estate is over $11,700,000. In New York the
estate must be over $5,930,000 in order to be taxed. The annual gift tax exclusion is $15,000 per donee
in 2021.
The estate tax has been eliminated in New Jersey. However, the New
Jersey Inheritance tax will remain in effect with no change during the same time period. This is a tax assessed on transfers
to beneficiaries other than spouses, parents, or children. Therefore, it would be imposed on nieces, nephews, siblings
and friends. The New Jersey Inheritance tax rates range from 11% to 16% based on taxable income.
15.
There is no limit on itemized deductions in 2021.
16. The Social Security wage base has increased
to $142,800 for 2021. If you start collecting Social Security at age 62, you will be subject to a 25% discount.
If you are between the age of 62-66, you can earn up to $18,950 before losing any benefits. There is no income restriction
of social security benefits after age 66.
17. In 2021, contributions to HSA Plans are deductible
up to $7,200 for family coverage. If over 55, you can deduct an additional $1,000.
18. There
will be an increase in the New Jersey Gross Income Tax exclusion for pension and retirement income to $100,000 on a joint
return.
19. The New Jersey sales tax is 6.625% for 2021.
Tax Cuts & Jobs Act - 2017
The tax law called
"Tax Cuts & Jobs Act" was passed by Congress at the end of 2017. This law creates numerous tax saving
opportunities for individuals and businesses. Some of the new laws are simple and others are very complex. I have outlined
below the highlights of this recently passed tax legislation.
Individuals
1. The new law provides for the same number of tax brackets but with lower rates. The highest tax rate
has been reduced from 39.6% to 37%.
2. The personal and dependent exemptions which were $4,050 each
have been eliminated.
3. The child tax credit for those under 17 has been increased from $2,000 to
$3,000 per child. The income level at which the credit begins to phase out also increases allowing more taxpayers to benefit.
4. The standard deduction has increased to $12,550 for single filers and $25,100 for married couples. If
over 65, there is an additional $1,650 per person.
5. The deduction for state and local income taxes
and property tax has been limited to $10,000. This will probably cause real estate to decrease in value.
6. The mortgage interest deduction has been limited to those loan balances up to $750,000 for debt incurred after 12/15/17
which is used to buy, build, or improve your primary or secondary home.
7. The interest deduction
on home equity loans has been changed. Interest paid on these loans for money used to buy, build, or improve a taxpayer's
home is still deductible. However, if the money from these loans is used for personal reasons such as paying off credit
card debts or buying a car, it is not deductible. If you convert these loans to a first mortgage then if becomes 100%
deductible.
8. The threshold for deducting medical expenses has been decreased from 10% to 7.5% of
your adjusted gross income for 2021.