4. Income Limits to Contribute to a Roth IRA Rise
Many people opt for opening Roth IRAs in order to pay fewer taxes during retirement, however, not everyone is able to. If your income is too high, you cannot make contributions.
In 2021, income limits will be changed too.
Joint filers can make reduced contributions if their modified adjusted gross income is $198,000, whereas this limit used to be $196,000 in 2020. You cannot make any contributions at $208,000, $2,000 higher than in 2020.
Single filers can make maximum contributions if their modified adjusted gross income is $125,000 compared to last year’s $124,000. You will not be able to make any contributions at $140,000 compared to $139,000 in 2020.
5. Standard Deduction Rises for All Filing Statuses
Are you going with the standard or itemized deduction in 2021? These changes might make you change your approach compared to what you did in 2020, so be careful and pick the right choice for your finances!
For married couples filing separately, the standard deductions sit at $12,550 ($12,400 in 2020) while for those who file jointly it’s at $25,100 ($24,800 in 2020).
For single filers, it’s $12,550 compared to $12,400 in 2020 and for the head of the household, $18,800 ($18,650 in 2020).