by Samantha Pahlow, CTFA, AWMA®
Senior Vice President
Portfolio and Wealth Management
One complexity of wealth and tax planning is the myriad of key numbers that change annually. While we recognize that many are currently preparing to file 2020 taxes, we want to help simplify the planning process for 2021 by providing an easy reference to some of the most important numbers.
Below you will find the 2021 Annual Limits Guide from the College for Financial Planning®, a helpful and concise reference for a variety of tax and wealth planning figures.
Ferguson Wellman and West Bearing manage assets for a broad range of clients who are at different stages of their lives, so we recognize that some of the information may not be pertinent to you. Here are some highlights that may impact your planning this year:
There are still seven tax rates, but the brackets have increased slightly to adjust for inflation.
Retirement plan contribution limits are largely unchanged from 2020; however, the combined employer and employee contribution limit has increased to $58,000 as seen in the retirement plans section of the 2021 Annual Limits Guide. The income limits for funding IRAs and Roth IRAs have also increased.
The annual gift tax exclusion remained $15,000 for individuals and $30,000 for couples.
The federal transfer (gift, estate and generation-skipping) tax basic exclusion increased to $11.7 million from $11.58 million in 2020.
The standard deduction increased to $25,100 for married filing jointly and $12,550 for individuals. An additional $1,350 in deduction is available for taxpayers age 65 and older and for taxpayers with vision loss.
Medicare Part A, B and D monthly premiums have increased.
The Social Security wage base increased to $142,800 and the Social Security cost-of-living adjustment for 2021 is 1.7 percent.
The qualified charitable distribution remains in place, allowing IRA owners who are 70 ½ or older to donate up to $100,000 annually directly from their IRA to qualifying public charities.
With the new administration and democratic majority in Congress, there is an increased potential for near-term changes in tax law. We encourage you to stay in contact with your portfolio manager and tax advisor for updates on how new tax law may affect your plans.
We also encourage you to reflect on your financial goals and objectives as the year unfolds. Ferguson Wellman and West Bearing have planning resources and forecasting tools to help you address your short- and long-term goals as well as important questions regarding retirement, gifting and lifestyle. We are pleased to provide this complimentary planning service to all our clients. Your portfolio manager can initiate this process for you and coordinate with your accountant and estate planning attorney when appropriate.
Ferguson Wellman and West Bearing do not provide tax, legal, insurance or medical advice. This material has been prepared for general educational and informational purposes only and not as a substitute for qualified counsel. You should consult qualified professionals to understand how this information may, or may not, apply specifically to you.