What's New For 2020

The 2020 tax year is her. Covid relief bills brought a slew of changes and filing for the 2021 tax year doesn’t look like it’s going to be much easier.

Some temporary tax provisions for the 2020 tax year were extended through 2021, while others were not. Then there’s all the usual updates to tax brackets, standard deductions and more.

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Table 1. 2021 Filing Requirements Chart for Most Taxpayers IF your

filing status is... AND at the end of 2021 you were...* THEN file

return if your gross income was at least...**

 

Single under 65

$12,550 65 or older $14,250

Head of household under 65 $18,800

65 or older $20,500

 

Married, filing jointly*** under 65

(both spouses)

$25,100 65 or older (one spouse) $26,450 65 or older

(both spouses) $27,800

Married, filing separately any age $5

 

Qualifying widow(er) under 65

$25,100 65 or older $26,450

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Additional Changes for 2021 include

1.No punishment for student loan relief:

Starting in 2021, loan cancellation for post-secondary education is no longer considered taxable income. This tax perk is expected to last through 2025, and it may become permanent

2. Higher deductions for medical expenses

That percentage, called the “floor,” has bounced between 7.5% and 10% of your adjusted gross income (AGI) for the past several years. For your 2021 taxes, it’s back down to 7.5% of your AGI.

3. A boosted child tax credit:

The government increased the credit to a maximum of $3,000 per child 17 and under, and $3,600 for children five and under. These credits are fully reimbursable, with no $2,500 earned income requirement — great news if you have a low tax burden.

Eligibility rules have also changed. To receive the maximum credit, your AGI must be under:

  • $75,000 for single filers

  • $112,500 for head-of-household filers

  • $150,000 for married couples filing jointly

 

4.Updated income brackets:

The 2021 tax brackets are:

  • 37% for incomes over $523,600 ($628,300 for married couples filing jointly).

  • 35%, for incomes over $209,425 ($418,850 for married couples filing jointly).

  • 32% for incomes over $164,925 ($329,850 for married couples filing jointly).

  • 24% for incomes over $86,375 ($172,750 for married couples filing jointly).

  • 22% for incomes over $40,525 ($81,050 for married couples filing jointly).

  • 12% for incomes over $9,950 ($19,900 for married couples filing jointly).

  • 10% for incomes of $9,950 or less ($19,900 for married couples filing jointly)
     

5.Required minimum distributions are back:

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. Whatever you do, don’t forget. If you fail to withdraw an adequate amount on time, Uncle Sam blasts you with a 50% excise tax on the money you were supposed to take.

6.Get a $300 charitable deduction, even if you don't itemize.

For the 2021 tax year, that benefit has expanded even further. Instead of a $300 deduction per return, it’s $300 per person. So if you file jointly with the standard deduction, you can deduct up to $600 for charitable contributions.