HERE’S A QUICK look at the world of taxes:
- The tax code was revamped in 2017—the most extensive rewrite since 1986. Most of the 2017 tax cut went to corporations. The new law has been a mixed bag for individuals, who now enjoy lower tax rates but also lost valuable deductions. Most households have seen their tax bill decline, but a significant minority are paying more. Despite hopes that the tax code would be simplified, that goal proved elusive. The tax code remains littered with a flabbergasting array of special taxes, deductions, credits and tax-favored savings accounts.
- The standard IRA contribution is $6,000 in 2020 and 2021, while the contribution limit for 401(k) plans is $19,500 in 2020 and 2021.
- In 2021 and subsequent years, minimum distributions from retirement accounts are required to begin at age 72, up from 70½ under the old rules. The requirement to take minimum distributions was waived for 2020.
- Pew Charitable Trusts found that 36.2% of all workers don’t have access to an employer-sponsored retirement plan, whether it’s a traditional pension plan or a 401(k) plan. For these workers, it’s especially important to contribute to an IRA and to fund a regular taxable account.
- An estimated 44% of households didn’t pay any federal income tax for 2018, according to the Tax Policy Center, which is a joint venture of the Urban Institute and Brookings Institution.
- For all taxpayers, the average federal tax rate in 2018 was 12.3% of total income, according to IRS figures.
- New York, Hawaii and Vermont have the highest total state tax burden, while Alaska, Delaware and Tennessee have the lowest, according to WalletHub. The ranking considers property taxes, individual income taxes, and sales and excise taxes.
- Some 6% of the federal government’s revenue come from the corporate income tax and just 0.6% from the federal estate and gift tax, according to a March 2015 report by Congress’s Joint Committee on Taxation. These figures pale next to the 79.7% that come from taxes on individual incomes, such as income taxes and Social Security payroll taxes (though, to be fair, a portion of these payroll taxes are paid by employers).
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