It's time to start planning for 2021 taxes. Here's a summary of the federal income tax rates and other tax changes that took effect January 1, 2021. The income tax adjustments provided below will apply to the 1040 return you'll file in 2022 for the 2021 tax year.

Standard deduction

The 2021 standard deduction is:

• $12,550 for single filers and married persons filing separately
• $25,100 for married couples filing jointly
• $18,800 for heads of household

Taxpayers who are 65 or older or blind can take an extra standard deduction of $1,350 ($1,700 for unmarried persons who are not a surviving spouse).

Tax rates

Your "marginal tax rate" is the highest tax rate you pay — the rate you pay on your last dollar of taxable income — in any given year. For 2021, the marginal tax rates are:

• 10% for single filers with income of $9,950 or less ($19,900 for married couples filing jointly)
• 12% for single filers with income over $9,950 ($19,900 for married couples filing jointly)
• 22% for single filers with income over $40,525 ($81,050 for married couples filing jointly)
• 24% for single filers with income over $86,375 ($172,750 for married couples filing jointly)
• 32% for single filers with income over $164,925 ($329,850 for married couples filing jointly)
• 35% for single filers with income over $209,425 ($418,850 for married couples filing jointly)
• 37% for single filers with income over $523,600 ($628,300 for married couples filing jointly)

Employer-sponsored retirement savings plans

For 2021, the maximum pretax contribution you can make to a 401(k) or 403(b) plan or most 457 plans remains at $19,500. For savers aged 50 or older by the end of 2021, the top pretax contribution is $19,500 plus a $6,500 catch-up amount, or a total of $26,000.

IRAs

IRA contributions are capped at $6,000 per individual, the same limit as last year. For persons age 50 or older by year-end, the limit is $7,000, including a $1,000 catch-up amount. The limit that applies to you represents the total annual amount you're allowed to contribute to all of your traditional and Roth IRAs combined.

As always, contributions to a Roth IRA are further limited for taxpayers with modified adjusted gross income (MAGI) above a threshold that gets adjusted annually for inflation. (Your MAGI is your total income plus certain tax deductions added back in.) Once your MAGI exceeds the threshold, your contribution limit gradually declines until, at a certain MAGI level, you're not eligible to contribute at all to a Roth IRA. For 2021, the contribution limit starts declining at $125,000 for single filers and $198,000 for married couples filing jointly.

Estate and gift tax

For 2021, the estate tax exclusion is $11,700,000, up from $11,580,000 in 2020. The top tax rate continues to be 40%. The annual gift tax exclusion stays at $15,000, meaning that, in 2021, you can transfer up to $15,000 per recipient without incurring gift tax.

Learn more

For more details on these and other IRS tax changes and their impact on you, call your Ernst & Young LLP financial planner.

This material is provided solely for educational purposes; it does not take into account any specific individual facts and circumstances. It is not intended, and should not be relied upon, as tax, accounting, or legal advice.