2021 Taxes And What You Need To Know
Before we know it, it’ll be time to file 2021 taxes so here’s some things that you should know before you file:
- Charitable Contributions - An above-the-line deduction of up to $600 charitable contributions for individuals married filing jointly ($300 for single filers). That means you will not have to itemize to receive this deduction but please make sure you have receipts of the contributions you are claiming on your tax return.
- Required Minimum Distributions (RMDs) - You must take your RMD this year as the extension that was given through the CARES Act in 2020 does not apply in 2021. Another change is that people are not required to start taking their RMDs until age 72 so it allows some to let their retirement assets grow for a little longer (the age previously was 70 ½).
- 3rd Round of Stimulus Payments - There will be a question about whether or not you received it. As a recap, the last payment was $1,400/individual plus $1,400/ for any qualified dependent(s). These payments are not taxable but the IRS wants to make sure they distributed the appropriate amount based on the income thresholds.
- Child Tax Credit – The American Rescue Plan Act allowed eligible families to receive monthly payments of $300 for children under 6 and $250 for children between ages 6-17 starting in July 2021. These payments are not taxable but rather are advance tax credits that you would typically receive when you file your taxes for 2021. You may still receive a partial credit if it wasn’t fully paid or you might owe money if the IRS overpaid you throughout this year.
New IRS features added in 2021:
- IRS Identification Protection (IP) PIN – Filers can voluntarily get an IP PIN starting this year. It’s a six-digit number that verifies your identity and prevents others from trying to file by using your Social Security number.
- My IRS page (https://irs.gov/payments/view-your-tax-account) - This website allows taxpayers to track upcoming payments, make payments, and see their payment history. The best part is that it’s updated regularly so you can be up to date!
- Refund tracker – People can now check the status of their refund through https://irs.gov/refunds.
Proposed Tax Changes in the Ways & Means Proposal to Keep an Eye on (nothing is officially passed as of the publishing date of this article. If there are any updates, we will be sure to let you know if and how the updates could affect you):
- Individual Tax Brackets – There is proposition to raise the highest income tax bracket from 37% to 39.6%
- Capital Gains – Proposal to raise the top capital gains rate of 20% to 25% incurred on or after September 13, 2021.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
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