The IRS today released an advance version of Rev. Proc. 2020-45 providing the annual inflation adjustments for more than 60 tax provisions to be used by individual taxpayers on their 2021 returns (that is, the returns that are generally filed in 2022).
Read Rev. Proc. 2020-45 [PDF 196 KB]
A related IRS release—IR-2020-245 (October 26, 2020)—notes that the “Consolidated Appropriation Act for 2020” increased the amount of the minimum addition tax for failure to file a tax return within 60 days of the due date. Beginning with returns due after December 31, 2019, the new additional tax is $435 or 100% of the amount of tax due, whichever is less (an increase from $330). The $435 additional tax will be adjusted for inflation.
With the inflation adjustment, Rev. Proc. 2020-45 provides that for tax year 2021:
The standard deduction amounts for 2021 will be increased, as follows:
The personal exemption for tax year 2021 remains at $0 (the personal exemption was suspended for tax years 2018 through 2025 by the U.S. tax law enacted in 2017 (Pub. L. No. 115-97, or the law that is often referred to as the “Tax Cuts and Jobs Act” (TCJA)).
For 2021, there is no limitation on overall itemized deductions (referred to as the “Pease” limitation under prior law) because that limitation was also suspended by the TCJA for years 2018-2025.
*For 2020, the AMT exemption amount was $72,900 and began to phase out at $518,400 ($113,400 for married couples filing jointly and began to phase out at $1,036,800).
The IRS today also released a notice providing cost of living adjustments and dollar limitations for qualified retirement plans for tax year 2021. Read TaxNewsFlash
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