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:
For the 2020 tax year, these are the standard deduction amounts:
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:
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.
For 2020, limits have gone up by $50, to $3,550, for self-only coverage; and by $100, to $7,100, for family coverage.
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.
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.
As in previous years, the IRS increased the income limit for 2020, making the tax credit available to even more people.
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.
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.