Key 2021 Tax Items are Calculated

Many tax items are adjusted annually for cost-of-living increases based on the Consumer Price Index (CPI) for the 12-month period ending August 31.  Since the August 31 CPI data has been released, Thomson Reuters Checkpoint has calculated the 2021 indexed amounts.  The following are some commonly referenced amounts:

 

  • Adoption credit.  For 2021, the credit allowed for adoptions other than for children with special needs will be limited to the amount of qualified adoption expense up to $14,440 (up from $14,300 for 2020).
  • Adoption exclusion.  For 2021, the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs will be $14,440 (up from $14,300 for 2020).
  • FSA salary reductions.  For purposes of determining whether a health FSA benefit will be a “qualified benefit” under Code Sec. 125 for the 2021 plan year, the cafeteria plan must provide that an employee may not elect to have salary reduction contributions in excess of $2,750 made to the health FSA (same as for 2020).
  • Insubstantial benefit charitable contribution limitation.  Givers must reduce their charitable deduction by the fair market value of goods or services they receive, even when the goods or services were donated to the ministry for use as premiums or gifts or when they were bought wholesale by the ministry. In circumstances, if givers receive unsolicited free, low-cost articles (free to the giver and low-cost to the distributing ministry) as part of the ministry’s stewardship efforts, they are allowed a full tax deduction for the donation:
    • Low-cost items.  If an item that has a cost (not retail value) of less than $11.30 (up from $11.20 for 2020) and bears the name or logo of your ministry is given in return for a donation of more than $56.50 (up from $56 for 2020), the giver may claim a charitable deduction for the full amount of the donation.  Examples of low-cost items are coffee mugs, key chains, bookmarks, and calendars.  
    • De minimis benefits.  A giver can take a full deduction if the fair market value of the benefits received in connection with a gift does not exceed 2% of the donation or $113 (up from $112 for 2020).
  • Gift tax annual exclusion.  For gifts made in 2021, the gift tax annual exclusion will be $15,000 (same as in 2020).

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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