The Social Security annual wage base for 2021 is $142,800, a $5,100 hike. The Social Security tax rate on employers and employees stays pat at 6.2%. Both will continue to pay the 1.45% Medicare tax on all compensation, with no cap. Individuals also pay the 0.9% Medicare surtax on wages and self-employment income over $200,000 for singles and $250,000 for couples. The surtax doesn’t hit employers.
The 2021 standard milage rate for business driving falls to 56¢ a mile. The milage allowance for medical travel and military moves drops to 16¢ a mile in 2021. The charitable driving rate stays put at 14¢ a mile. It’s fixed by law.
Businesses get a nice surprise. They can deduct 100% of business meals in 2021 and 2022, as Congress decided to suspend the 50% haircut for two years to encourage more restaurant dining. This includes client meals as well as meals for employees on business travel. Note that this easing does not apply to 2020.
A key dollar threshold on the 20% deduction for pass-through income rises in 2021. Self-employeds and owners of LLCs, S corporations and other pass-throughs can deduct 20% of their qualified business income, subject to limitations for individuals with taxable incomes of more than $329,800 for joint filers and $164,900 for singles.
$1,050,000 of assets can be expensed in 2021, and this amount phases out dollar for dollar once more than $2,620,000 of assets are put into service during 2021.
U.S. taxpayers working abroad have a larger income exclusion…$108,700.