2021 Tax-Related Items Indexed for Inflation

Social Security tax

The amount of employees’ earnings that are subject to Social Security tax is capped for 2021 at $142,800 (up from $137,700 for 2020).

Deductions

• Section 179 expensing:
  • Limit: $1.05 million (up from $1.04 million for 2020)
  • Phaseout: $2.62 million (up from $2.59 million)
• Income-based phase-out for certain limits on the Sec. 199A qualified business income deduction begins at:
  • Married filing jointly: $329,800 (up from $326,600)
  • Married filing separately: $164,925 (up from $163,300)
  • Other filers: $164,900 (up from $163,300)

Business meals

Deduction for eligible business-related food and beverage expenses provided by a restaurant: 100% (up from 50%)

Retirement plans

• Employee contributions to 401(k) plans: $19,500 (unchanged from 2020)
• Catch-up contributions to 401(k) plans: $6,500 (unchanged)
• Employee contributions to SIMPLEs: $13,500 (unchanged)
• Catch-up contributions to SIMPLEs: $3,000 (unchanged)
• Combined employer/employee contributions to defined contribution plans: $58,000 (up from $57,000)
• Maximum compensation used to determine contributions: $290,000 (up from $285,000)
• Annual benefit for defined benefit plans: $230,000 (up from $225,000)
• Compensation defining a highly compensated employee: $130,000 (unchanged)
• Compensation defining a “key” employee: $185,000 (unchanged)

Other employee benefits

• Qualified transportation fringe-benefits employee income exclusion: $270 per month (unchanged)
• Health Savings Account contributions:
  • Individual coverage: $3,600 (up from $3,550)
  • Family coverage: $7,200 (up from $7,100)
  • Catch-up contribution: $1,000 (unchanged)
• Flexible Spending Account contributions:
  • Health care: $2,750 (unchanged)
  • Dependent care: $5,000 (unchanged)

These are only some of the tax limits that may affect your business and additional rules may apply. If you have questions, please contact us.

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If you want to talk to us about your personal tax situation, please email us via our contact page and visit our website at www.ablonco.com.

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