Many tax-related limits affecting businesses are changed annually to account for inflation, and many have increased for 2021. Some, however, have stayed low, and there’s more good news: the deduction for business meals doubled for this year. Here’s what you need to know.
Social Security changes
There was a change in the amount of earnings subject to Social Security. This number is now capped for 2021 at $142,800 (up from $137,700 for 2020).
Deduction changes
There have also been changes to section 179 expensing:
- The limit is now $1.05 million (up from $1.04 million for 2020)
- The pasehaseout is $2.62 million (up from $2.59 million)
- Additionally, income-based phase-out for certain limits on the Sec. 199A qualified business income deduction begin $329,800 (up from $326,600) if married filing jointly and $164,925 (up from $163,300) if married filing separately
Business meal expense changes
Eligible business-related food and beverage expenses provided by a restaurant are now deductible at 100% (up from 50% last year).
Retirement plan changes
Here are the highlights:
- Maximum compensation used to determine contributions: $290,000 (up from $285,000)
- Annual benefit for defined benefit plans: $230,000 (up from $225,000)
- Compensation defining a highly compensated employee: $130,000 (unchanged)
- Combined employer/employee contributions to defined contribution plans: $58,000 (up from $57,000)
Other employee benefits
Some Health Savings Account contribution exclusions have changed as well.
- Individual coverage is up to $3,600 (from $3,550)
- Family coverage is up to $7,200 (from $7,100)
These are only some of the tax limits that may affect your business and additional rules may apply. If you have questions, contact your trusted Smolin advisor today.