By Sharon Heinz
Owner and Enrolled Agent
Profit Wise Accounting, Tax and Marketing
At this time of year, your focus obviously is on ways to reduce your 2020 tax bill.
First, here are the main things you need to know for the 2021 tax season:
• Tax Day is Thursday, April 15, 2021. You must file your 2020 tax returns by this date!
• The standard deduction for 2020 increased to $12,400 for single filers
and $24,800 for married couples filing jointly.
• Income tax brackets increased in 2020 to account for inflation.
Here are some deductions and credits you might be able to claim on your 2020 tax return:
Charitable Deductions: In an effort to encourage more charitable giving, the CARES Act allows you to deduct up to 100% of their adjusted gross income. The CARES Act added a new “above-the-line” deduction that will help you write off up to $300 of charitable contributions you made in cash.
Home Office Deduction: But if you are one of the millions of workers who were sent home to work remotely, you won’t be able to claim the home office deduction unless you are self-employed.
Earned Income Tax Credit: The EITC is a refundable credit designed to help out low- and middle-income workers (workers earning up to $56,844 during the 2020 tax year might be eligible). Depending on your income, your filing status and how many children you have, the credit could save you anywhere from a few hundred to a few thousand dollars on your taxes.
Child Tax Credit: Families can claim up to $2,000 per qualified child with this tax credit (the income limits for this credit are $200,000 for single parents and $400,000 for married couples). And since this is a refundable credit, your family can receive up to $1,400 per child as a refund.
Stimulus Checks: As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act’s $2 trillion relief package, the government sent up to $1,200 in the form of a stimulus check to millions of Americans shortly after the pandemic shut most of the country down; the good news is your stimulus check will not count as taxable income. Instead, it’s being treated like a refundable tax credit for 2020.
Unemployment Benefits: Many Americans found themselves out of work after the pandemic shut down a large part of the economy and turned to unemployment insurance for help. Those who received unemployment benefits will need to pay income taxes on that money.
Retirement Plans: 401(k)s, IRAs and More RMDs were pushed in the Coronavirus Aid, Relief and Economic Security (CARES) Act from age 70½ to 72. Plus, RMDs in 2020 were waived.
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