Many 2021 Tax Amounts for Businesses Increased

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Tax-related limits affecting businesses are annually indexed for inflation, and JLK Rosenberger has provided a summary below of those that may be important to you and your business. Many have increased for 2021; some stayed the same due to low inflation. The highlight might be the business meals deduction that doubled for 2021 following a new law enacted in late 2020. 

Social Security tax

The amount of employees’ earnings 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)
We’re here to help

These are only some of the tax limits that may affect your business, and additional rules may apply. If you have questions or want additional information, call us at 949-860-9902 or click here to contact us. We look forward to speaking with you soon.

© 2021

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