For most, a new year brings about thoughts of resolutions and new beginnings. For me, it brings about a new tax filing season! I appreciate all of my clients greatly but trust me when I say that one of my favorite days each year occurs in mid-April (I often refer to it as a second Christmas) because that date marks the conclusion of a three-month marathon for accountants.
For 2020 individual tax returns, Tax Day is April 15th, 2021 so there is still plenty of time to have your 2020 tax return prepared and filed by that date.
Items of interest related to 2020 individual tax returns:
The standard deduction for 2020 increased to $12,400 for single filers and $24,800 for married couples filing jointly.
As part of the CARES Act related to COVID-19, you can take an additional “above the line” $300 deduction for charitable contributions even if you utilize the standard deduction for 2020. Charitable contributions are normally for itemizers only but for 2020 you can take the $300 deduction even if you are a non-itemizer.
If you have children, you can claim a child tax credit up to $2,000 credit per qualified child (16 years of age or younger). The income limits for this credit are $200,000 for single parents and $400,000 for married couples. For children ages 17 or 18 and full-time students ages 19-24 a $500 non-refundable credit is potentially available.
If you received a stimulus check during 2020, it is not taxable. You may be eligible to claim the recovery rebate credit on your 2020 federal income tax return if you were entitled to but did not receive a stimulus check or if your stimulus check was less than $1,200 ($2,400 if married filing jointly for 2019 or 2018), plus $500 for each qualifying child you had in 2020.
Finally, some items you may find of interest for 2021:
The standard mileage rate is 56 cents per mile driven for business use.
The 401(k) contribution limit for employees has increased from $19,000 to $19,500 and the catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.
The annual IRA contribution limit for 2021 is $6,000, or $7,000 if you’re age 50 or older.
If you own a traditional IRA, you must begin taking money out of your account by April 1st of the year following reaching 72 years of age. Those withdrawals are called required minimum distributions (RMDs). Please note that the CARES Act allowed seniors to skip RMDs altogether in 2020 without penalty.
This article originally appeared in the February 2021 issue of East End Living Magazine and is reprinted here with permission.