If you are self-filing your 2021 taxes, you may want to double-check. Make sure you don’t miss out on any tax changes. While some deductions will be the same this year, there are other significant changes due to the COVID-19 stimulus plans over the past two years. Here are a few specific tax-related items for the 2021 tax filing season that may impact you
Expanded child tax credits
The American Rescue Plan increased the child tax credit to $3,000 for families with kids ages 17 and under for 2021, with an extra $600 for children under age 6. Millions of Americans have received advanced credits. Filers who earned more than expected may need to pay some of it back. To qualify for the full credit, single filers need a modified adjusted gross income of less than $75,000. While married couples filing together must earn under $150,000.
Taxpayers that made charitable donations may take advantage of a write-off for cash gifts in 2021, even if they don’t itemize deductions on their federal tax return. For 2021, single filers may claim cash donations up to $300, and married couples may get up to $600, according to the IRS, from a relief measure from 2020.
Health insurance premium subsidies
In March 2021, Congress increased subsidies to help make health insurance more affordable for Americans. Since premium subsidies are capped at 8.5% of household income, some filers may have to repay some of the benefits. For example, if their earnings exceed the thresholds for 2021.
Required Minimum Distributions (RMDs)
With new RMD changes initiated from The SECURE Act, if you turned age 70 1/2 in 2019, you would’ve been required to take your first RMD by April 1, 2020. If you turned age 70 1/2 in 2020 or later, you should have taken your first RMD by April 1 of the year after you turned age 72. This rule generally applies to the original owner’s age of a traditional IRA, SIMPLE IRA, SEP-IRA, a 401(k), or 403(b). Roth IRAs do not have RMDs.
Rely on your financial planning professional to help with tax changes
Work with your financial professional regarding your investments and deductions. They can help to determine how these tax changes may impact your tax situation for 2021. Even if filing yourself.
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