The Internal Revenue Service released new income tax brackets and retirement contribution limits. The tax rates were unchanged, but the new tax income limits were adjusted for inflation.
How are taxes determined? The IRS uses tax brackets. For every dollar of income that falls into each bracket, you owe a percentage of that dollar in taxes. Learn more about how taxes are determined here.
Here’s a breakdown of the 2021 tax brackets.
For unmarried individuals filing as single:
10%: Income up to $9,875
12%: Income between $9,875 and $40,125
22%: Income between $40,125 and $85,525
24%: Income between $85,525 and $163,300
32%: Income between $163,300 and $207,350
35%: Income between $207,350 and $518,400
37%: Income over $518,400
For married individuals filing jointly:
10%: Income up to $19,750
12%: Income between $19,750 and $80,250
22%: Income between $80,250 and $171,050
24%: Income between $171,050 and $326,600
32%: Income between $326,600 and $414,700
35%: Income between $414,700 and $622,050
37%: Income over $622,050
For married individuals filing separately:
10%: Income up to $9,875
12%: Income between $9,875 and $40,125
22%: Income between $40,125 and $85,525
24%: Income between $85,525 and $163,300
32%: Income between $163,300 and $207,350
35%: Income between $207,350 and $311,025
37%: Income over $311,025
For heads of households:
10%: Income up to $14,100
12%: Income between $14,100 and $53,700
22%: Income between $53,700 and $85,500
24%: Income between $85,500 and $163,300
32%: Income between $163,300 and $207,350
35%: Income between $207,350 and $518,400
37%: Income over $518,400
Retirement contribution limits for 2021
The 2021 contribution limits for 401(k), 403(b), most 457 plans and the federal Thrift Savings plans are the same as 2020 at $19,500. The catch-up contribution limit for employees aged 50 and up is $6,500.
The limit on annual contributions to an independent retirement account remains unchanged at $6,000.
Most Americans don’t save enough for retirement. While it may seem like a formidable task, a little bit of money can go a long way, thanks to compound interest. Even increasing your monthly contribution by 1% can make a huge difference over time. If your employer matches your contribution, try and meet their match.
Here are some more ways to catch up.
Image: Giorgio Trovato
Get essential money news & money moves with the Easy Money newsletter.
Free in your inbox each Friday.
