New Tax Changes You Should Know About
Happy new year comes new tax changes, some of which were buried in the 5,593 pages of the year-end bill and may have eluded you. Aside from COVID checks and extended unemployment benefits, these are some of the key tax changes you should be aware of.
Higher standard deductions
On your tax return, you must list either the standard deduction or the itemized deduction, which limits your taxable income, although most people take the standard deduction as it usually exceeds the savings they would have gained from listing (this is also easier to do). For your income in 2020, the standard deduction has been increased:
- Single filter: $ 12,400, $ 200 more.
- Married, joint filing: $ 24,800, growth $ 400.
- Head of household: $ 18,650, up $ 300.
High income groups
The IRS has released its annual round of inflation adjustments for the next year, updating its tax rates for the 2020 tax year . Here are the corrected Kiplinger brackets:
- 10%: up to $ 9875 (joint marriage registration: up to $ 19,750)
- 12%: $ 9,876 to $ 40,125 (co-filing: $ 19,751 to $ 80,250)
- 22%: $ 40,126 to $ 85,525 (co-filing: $ 80,251 to $ 171,050)
- 24%: $ 85,526 to $ 163,300 (co-filing: $ 171,051 to $ 326,600)
- 32%: $ 163,301 to $ 207,350 (co-filing: $ 326,601 to $ 414,700)
- 35%: $ 207,351 to $ 518,400 (co-submission: $ 414,701 to $ 622,050)
- 37%: over $ 518,400 (total supply: over $ 622,050)
More information on tax brackets can be found on the IRS website .
Flexible expense accounts
Your Workplace Flexible Spending Account (FSA) may no longer be strictly ‘use or lose’ – the latest bailout bill allows your employer to carry forward funds to 2021 and 2022 if they choose to offer the opportunity (see this post by Lifehacker ). In addition, the annual HSA deductible contribution limit in 2020 will rise by $ 50 for individuals and $ 100 for families next year, bringing them to $ 3,550 and $ 7,100, respectively.
Charitable contributions
Taxpayers can now be eligible for the deduction of charitable cash contributions of up to 300 dollars US ($ 600 for joint applicants) in 2021, even if you do not list your deductions. For 2020, that’s $ 150 per submission ($ 300 for co-submission).
Deductions for medical expenses
The 7.5% threshold for the medical expense deduction requirement was set to increase to 10% of the recipient’s adjusted gross income for 2021, but new legislation has consistently lowered the threshold to 7.5% , giving Americans a break from deductible non-payment expenses. medical services. pocket medical expenses.
Student debt paid by employer is tax-free
The provision allowing employers to voluntarily repay employee college loans up to $ 5,250 during 2020 has been extended by five years. Both employers and workers can avoid paying federal payroll taxes.
Business lunch discounts
For better or worse, lunch of three martinis is back – you can now get 100% off business food and drinks in 2021 and 2022, up 50% from 2020. as well as in restaurants.
This post was published on January 7, 2021 and was updated on January 8, 2021 to change the title and adjust the donation limits for the 2020 tax year.