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2021 Tax Planning Guide
Alternative Minimum Tax
The Alternative Minimum Tax (AMT) was designed to limit allowable deductions taken by the highest-income taxpayers to ensure they pay their fair share of taxes. There was a modest increase for inflation for 2021.
KIDDIE TAX
For 2020 and forward, the kiddie tax goes back to the previous method of using the parent’s marginal tax rate. If a child has both earned and unearned income, they are allowed a standard deduction of up to $1,100 of their unearned income or their earned income plus $350, whichever is greater, but can’t be more than the regular standard deduction amount.SOCIAL SECURITY TAX WAGE BASE INCREASED
Beginning in 2021, the maximum earnings subject to Social Security tax increased to $142,800. Currently, the employer and employee each pay half of the 12.4% Social Security tax and the 2.9% Medicare tax.Self-employed workers must pay the full 12.4% Social Security tax, which could result in a maximum tax increase of $632.40 for 2021, due to the increased wage base.
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