If you earned less than $75,000 in 2021, you could end up paying little to no income taxes on it.
With the job market and employment landscape suffering due to the COVID chaos, experts predict that more than 50% of American taxpayers will fall under the $0 tax category. This projection is supported, in part, by the various new deductions and credits available under the American Rescue Act, which have already lowered the tax liability for many. In 2020, for instance, approximately 61% of Americans paid no federal income taxes. Apart from zero taxes, many households can even get some money back from the IRS if they file their 2021 tax returns before spring next year (thanks to the availability of new tax credits).
What if you're making more than $75,000 a year? If your total income is less than $100,000, you'll only have to pay 1.8% of your income in taxes. The Biden administration aims to recover taxes from high earners by hitting them with an estimated 20.80*% to 25.80% tax rate.
Here's a projection of the 2021 income tax rates (courtesy of CNBC):
If you or your household earns less than $75,000, you’re likely going to receive multiple stimulus checks from the government (upto $1,400 per adult) over the course of the year. Additionally, you’re probably eligible for the Child Tax credits if you have kids or the earned income tax credits - both of which may be credited to you even if your tax bill is zero dollars!
However, not everyone in that first tax bracket category will avoid owing taxes. If you’re employed, you could still be paying payroll taxes amounting to 7.65% of your salary into programs like Social Security and Medicare. Your employer would match the percentage of taxes that you pay into the program (altogether 15.3%). If you’re self-employed, you’d be paying for both shares, i.e., the whole 15.3% yourself.
To find out what your taxes will look like in 2021, contact the experts at Landmark Tax. You can rest easy knowing your tax returns will be calculated tirelessly by seasoned tax professionals. Landmark Tax strives to make sure your taxes are accurately handled and that you only pay what you owe to Caesar (and not a dime more).