What you need to know for the 2021 tax season
As you prepare to tackle your taxes in 2021, keep in mind that a number of things may look different for filing this year. A changing economy in 2020 introduced several new tax considerations that could impact your financial standing. And unlike last year, there will be no filing deadline extension—you’ll need to have everything submitted by April 15, 2021.
So what changed this year and how could it affect you? Don’t worry, we’ve put together a list of things you need to consider in order to make this tax season a breeze.
You may have received one or multiple economic stimulus checks as a part of the federal COVID response last year. These economic stimulus checks do not qualify as taxable income, and therefore will not increase the amount of money you owe in 2021. Generally, you were considered eligible to receive these payments in the amount of $1200 and $600, respectively, if you were not a dependent of another taxpayer and your income did not exceed:
- $150,000 if married and filing a joint return
- $112,500 if filing as head of household or
- $75,000 for eligible individuals using any other filing status
If you were eligible for one or more stimulus payment but never received it, you can still claim the full amount on your tax return as a Recovery Rebate Credit. The IRS has helpful guides for learning more about Recovery Rebate Credits and Economic Impact Payments if these situations apply to you.
The Coronavirus Aid, Relief and Economic Security (CARES) Act, which was enacted early in 2020, included a temporary new provision designed to encourage charitable giving. As a result, you can deduct up to $300 of cash donations made in 2020 without having to itemize.
According to the IRS, nearly nine in 10 taxpayers take the standard deduction and could potentially qualify for this new tax deduction. Thanks to this new change, taxpayers can claim an "above-the-line" deduction of up to $300 for cash donations made to charity during 2020. This means the deduction lowers both the adjusted gross income and taxable income – which means anyone donating to qualifying tax-exempt organizations can see tax savings for those donations.
Many people lost their jobs and received unemployment benefits in 2020. These benefits count as taxable income, so if you received unemployment benefits in the last year and did not have taxes withheld, be sure you calculate that into what you owe on your tax return.
The standard deduction is a set amount of income that is not subject to tax, which can be used to reduce what you owe. Many people opt for the standard deduction instead of itemizing their tax deductions, since it results in a lesser amount of tax payable. The standard deduction has changed this year for each taxpayer status:
- Single: $12,550 (up from $12,400 in 2020)
- Head of Household: $18,800 (up from $18,650)
- Married Filing Jointly: $25,100 (up from $24,800)
- Married Filing Separately: $12,550 (up from $12,400)
For those who are itemizing their taxes instead, First Tech has a list of surprising and overlooked tax deductions that you won’t want to miss. Be sure to consult a Certified Public Accountant or another licensed tax professional when considering claiming any tax deductions or credits.