Page 16 - Supplement to Income Tax TY2021

Estimating Your 2021 Taxes

on the policyholder’s age at the end of the year. The AGI is at least $47,915 or $53,865 if married filing
2021 limit is $450 for taxpayers age 40 or younger, jointly. For taxpayers with three or more children,
$850 for those over age 40 but not over 50, $1,690 the credit is completely phased out if either earned
for those over age 50 but not over 60, $4,520 for income or AGI is at least $51,464 or $57,414 if
those over age 60 but not over 70, and $5,640 for married filing jointly. For taxpayers with no children,
those over age 70. the phaseout is complete at income of $15,980 or

Per diem payments from long-term-care policies $21,920 if married filing jointly.
(page 422). Payments received from a qualified Student loan interest deduction (pages 623–625). The
long-term-care insurance contract on a per diem or maximum above-the-line deduction for student loan
other periodic basis are tax free for 2021 up to $400 interest is set by statute at $2,500. For 2021, the
per day without regard to actual expenses incurred (up $2,500 limit is phased out if modified adjusted gross
from $380 in 2020). income (MAGI) is between $140,000 and $170,000
Foreign earned income and housing exclusions (pages for married couples filing jointly, or between $70,000
652–659). The maximum foreign earned income and $85,000 if single, head of household, or qualifying
exclusion for 2021 is $108,700. widow/widower. Married persons filing separately and
Based on a maximum earned income exclusion individuals who meet the definition of a dependent
of $108,700, the base foreign housing amount are not eligible for the deduction.
is $17,392 (16% × $108,700) for the full year, or American opportunity credit and lifetime learning
$47.65 per day if the foreign residence or physical credit (pages 617–619). The credit amount and
presence test is met for only part of the year. The phaseout range for the American opportunity credit
foreign housing exclusion is allowed to the extent are not subject to cost-of-living changes. By statute, the
that housing expenses, not to exceed the annual credit of up to $2,500 per eligible student phases out
limit, exceed the base amount. Based on a maximum over a MAGI range of $80,000 to $90,000 for single
earned income exclusion of $108,700, the 2021 filers, heads of households, and qualifying widows/
limit on housing expenses will generally be $32,610 widowers, and $160,000 to $180,000 for joint filers.
(30% × $108,700) for the full year, or $89.34 per For 2021, the same MAGI limits apply to the lifetime
qualifying day, but the IRS will announce a higher learning credit. Married persons filing separately may
housing expense limit for designated high-cost areas. not claim either credit.
Earned income credit (pages 517–520). For 2021, the Transportation fringe benefits (pages 68–71). The
maximum credit is $3,618 for one child, $5,980 for 2021 monthly tax-free limit for employer-provided
two children, $6,728 for three or more children, and transit passes and commuter van/bus transportation
$543 if there are no children. (paid by employer or by employee salary-reduction
For taxpayers with children, the 2021 credit will contributions), as well as the monthly exclusion for
begin to phase out if either earned income or AGI parking benefits, is unchanged at $270 per month.
is at least $19,520 if single, head of household, or
qualifying widow/widower, or at least $25,470 Gift tax annual exclusion and lifetime exemption from
if married filing jointly. Married persons filing gift tax and estate tax (pages 677-682). The annual
separately may not claim the credit. For those exclusion for gifts made in 2021 is $15,000 per
with no children, the phaseout begins at $8,880, or individual donee (unchanged from 2020). Married
$14,820 if married filing jointly. For taxpayers with couples can agree to “split” one spouse’s gifts, doubling
one child, the credit is completely phased out if either the 2021 exclusion for each donee to $30,000. The
earned income or AGI is $42,158 or more, $48,108 unlimited marital deduction applies to gifts made to a
if married filing jointly. For two children, the credit spouse who is a U.S. citizen. For gifts to a noncitizen
is completely phased out if either earned income or spouse, the annual exclusion for 2021 is $159,000.

14 | Supplement to J.K. Lasser’s Your Income Tax 2021