This time of year, Americans are getting their financial lives in order and assessing the last fiscal year. Tax season can seem to be more complicated with every passing tax law and the last two years have added even more changes. Both 2020 and 2021 have come with modifications to the tax laws that have impacted some key components to filing your taxes. Tax season can be an uneasy time of year even without the added confusion from changes to the tax code, here are a few things that are different this year as you begin the process for tax year 2021.

Don’t assume you’re in the same tax bracket as last year, income brackets have expanded. These changes were made to the tax code in 2020 prior to our current inflation worries, however the brackets have been increased to account for natural inflation as projected in October 2020. Be sure to check the updated ranges before you file to avoid any Tax Day surprises.

Don’t assume you’re in the same tax bracket as last year, income brackets have expanded. These changes were made to the tax code in 2020 prior to our current inflation worries, however the brackets have been increased to account for natural inflation as projected in October 2020. Be sure to check the updated ranges before you file to avoid any Tax Day surprises.

The Standard Deduction has increased for all filing categories, married filing joint, married filing separate, single or head of household. Each Standard Deduction has increased by $150 or $300 for married filing joint. The Standard Deduction is $12,550 for single filers and married filing separate, $18,800 for head of household filers and $25,100 for married couples filing jointly.

Student Loan Forgiveness is no longer counted against you on your tax return. Starting for tax year 2021, loan cancellations for post-secondary education are no longer considered taxable income. This is a huge benefit to anyone in a high tax bracket with loan forgiveness.

The Child Tax Credit was boosted to $3,000 per child aged 17 and under and $3600 for children five and under. There are eligibility rules and income thresholds so always best to speak with a tax professional to make sure you’re capturing the maximum benefits. 

New in 2021 is also the ability to claim a charitable contribution deduction for each person in a filing arrangement. The rule was changed in 2020 to allow for a $300 deduction on top of the Standard Deduction. This year that rule was expanded further to $300 per person, so a married couple filing jointly can now deduct up to $600 for charitable contributions on top of the standard deduction.

Many of these changes will lead to a different experience this year. Any questions about your tax filing situation are always best suited for a tax professional. For some additional information and a complete bracket breakdown please see the attached article;

For some additional information and a complete bracket breakdown please see the attached article; https://www.yahoo.com/video/7-tax-changes-know-filing-233000743.html#:~:text=Higher%20standard%20deductions&text=For%20the%202021%20tax%20year%2C%20the%20standard%20deduction%20is%20getting,(up%20%24300%20from%202020)