Tax Credits, Income and Exclusion Limits Increasing for 2021!
As a result of annual IRS cost-of-living adjustments, a number of federal tax credit amounts and income limits will increase in 2021. Here are some of the most significant changes affecting taxpayers at a variety of income levels.
EARNED INCOME CREDIT (EIC) CHANGES. The maximum credit amounts for taxpayers with zero, one, two, or three or more children will all increase. For example, the maximum credit for a family with three or more children will be $6,728, up from $6,600 in 2020. The income limit to receive the maximum credit, along with the maximum income at which a taxpayer may receive an EIC in any amount, will also rise from 2020 levels.
HIGHER EXCLUSION FOR ESTATE TRANSFERS. The lifetime exclusion for estate transfers and bequeathals will be $11,700,000 in 2021, up from $11,580,000 in 2020. However, the annual gift and transfer exclusion limit will remain at $15,000.
INCREASED INCOME LIMIT FOR THE LIFETIME LEARNING CREDIT. For couples filing jointly who claim the Lifetime Learning Credit, the gross income level used to calculate a reduction in the credit will rise from $118,000 to $119,000.
LARGER ADOPTION CREDIT. The maximum credit for adoption expenses will increase by $140 for 2021, up to $14,440.
HIGHER FOREIGN INCOME EXCLUSION. The foreign earned income exclusion amount will be $108,700 in 2021, a $1,100 increase over the 2020 level of $107,600.
A tax professional can help you determine whether these and other IRS adjustments could affect your 2021 taxes. If a significant change in your annual tax bill might occur, you may need to adjust your paycheck withholding amount and/or quarterly estimated tax payments.
CONTACT RTW TODAY TO SCHEDULE A VIRTUAL OR FACE TO FACE APPOINTMENT AT YOUR CONVENIENCE https://calendly.com/rtw-calendar OR CALL US AT (855) 205-8486.