What changed in 2021: COVID stimulus and your taxes

March 8, 2021
We learned a tremendous amount of lessons from our COVID-19 experience. Here's all you need to know about the most significant tax changes in 2021.
What changed in 2021: COVID stimulus and your taxes

What changed in 2021: COVID stimulus and your taxes

Must-knows about your 2020 personal income taxes

Your federal income tax return this year will be a little different from the  past few years due to new laws stemming from the coronavirus pandemic, the usual inflation adjustments and new legislation instituted in the past year by Congress. 

These changes include new standard deduction amounts, income thresholds for tax brackets, certain tax credits.

There have been lots of new regulations and tax impacts from all the legislation passed in the last year as part of economy-boosting measures. Here are a few changes you need to be aware of:

Increased Standard Deductions

For the 2020 tax year, these are the standard deduction amounts:

Raised income brackets

Explore the 2020 Income Tax Brackets

We present to you the tax rates for the 2021 filing season for three common filing statuses. Dollar amounts represent taxable income earned in 2020:

 

 RATE SINGLE MARRIED FILING JOINTLY  HEAD OF HOUSEHOLD

10%

$0 - $9,875

$0 - $19,750

$0 - $14,100

22%

$40,126 - $85,525

$80,251 - $171,050

$53,701 - $85,500

24%

$85,526 - $163,300

$171,051 - $326,600

$85,501 - 163,300

32%

$163,301 - $207,350

$326,601 - $414,700

$163,301 - $207,350

35%

$207,351 - $518,400

$414,701 - $622,050

$207,351 - $518,400

37%

More than $518,400

More than $622,050

More than $518,400

 

RATE

MARRIED JOINT

RETURN

SINGLE

INDIVIDUAL

HEAD OF

HOUSEHOLD

MARRIED SEPARATE

RETURN

10%

$19,900 or less

$9950 or less

$14,200 or less

$9950 or less 

12%

Over $ 19,900

Over $9,950

Over $14,200

Over $9,950

22%

Over $ 81,050

Over $ 40,525

Over $54,200

Over $40,525

24%

Over $172,750

Over $86,375

Over $86,350

Over $ 86,375

32%

Over $329,850

Over $164,925

Over $164,900

Over $164,925

35%

Over $418,850

Over $209,425

Over $209,400

Over $209,425

37%

Over $628,300

Over $523,600

Over $523,600

Over $314,150

Contribution limits and income thresholds for retirement accounts such as IRAs and 401(k)s

Once you reach age 72, the IRS says you must start withdrawing money annually from tax-advantaged retirement accounts, including traditional IRAs and 401(k)s.

Increased health savings account (HSA) limits

For 2020, limits have gone up by $50, to $3,550, for self-only coverage; and by $100, to $7,100, for family coverage.

Waived RMDs

The Coronavirus Aid, Relief, and Economic Security Act of 2020, better known as the CARES Act, waived required minimum distributions (RMDs) from retirement accounts for 2020.

Exemptions from gift and estate tax

The wealth you can pass onto the next generation without paying taxes in 2021 is $11.7 million, up from $11.58 million in 2020, while the annual exclusion for gifts is $15,000, the same as the last year.

Higher income limits for the saver’s credit

The new limits

As in previous years, the IRS increased the income limit for 2020, making the tax credit available to even more people. 

Your stimulus check updates

Federal lawmakers enacted a $2 trillion economic stimulus package on March 27 that sent most Americans checks of up to $1,200, as a method to pass on money directly to the families struggling with the economic fallout of the Covid-19 pandemic.

The legislation will give single adults who reported AGI of $75,000 or less on their 2019 tax returns a one-time check for $1,200. Married couples who filed jointly will receive $2,400. Families will get an additional $500 for each child under 17. 

The second round of stimulus checks was included as a relief, signed on to a law on Dec. 27, 2020. The third round of $1,400 stimulus checks was passed by the House on Feb. 27, 2021, and was pushed to the Senate for approval.

Check the IRS Get My Payment web tool for determining the status of your stimulus checks.

Key takeaways to keep in mind :

Taxes and COVID-19

Taxation is profoundly affected by the pandemic. People have moved out of cities, businesses have been shut, employees filed for unemployment, many started to work from home, adding additional forms. Because of COVID-19, filing taxes may be different and more complicated in 2021 than in previous years. 

 As a result, unless your employment was completely unchanged by COVID-19, we recommend using a provider that offers a free plan with the option to upgrade to a paid plan if the return turns out to be more complicated.

Tax advice for 2021

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