This year has been a year like none other, so it stands to reason that tax season 2021 will have a few surprises in store as well. Between now and April 15, 2021, you have some time to prepare, and we have the scoop on a few things that you can expect to be different this year.
If you were one of the millions of Americans who received a stimulus check under the Coronavirus Aid, Relief, and Economic Security (CARES) Act you might not know that it was technically an advance payment of a special 2020 tax credit, which you'll have to reconcile on your 2020 return. If you're a single filer with an adjusted gross income (AGI) above $75,000, a head of household filer with an AGI above $112,500, or joint filers with an AGI above $150,000, you may exceed the tax credit allowed and have to claim the balance on your 2020 return. The good news is that you shouldn't have to repay the IRS if the payment you got was more than your credit.
Under the CARES Act, you can deduct more of your 2020 charitable donations, in fact, you can deduct up to 100% of your AGI in qualified charitable donations if you itemize your deductions. If you're taking the standard deduction, the CARES Act includes a new "above-the-line" deduction that lets you write off up to $300 of charitable contributions made in cash.
If you spent time in the hospital in 2020, or had some hefty medical bills, tax season may have added some relief in store for you. You'll be able to deduct any medical expenses above 7.5% of your AGI, as long as you itemize your deductions.
Earned Income Tax Credit
This refundable credit is for low- and middle-income workers earning up to $56,844 during the 2020 tax year. The credit takes into consideration your income, filing status, and number of children, but if you're eligible, it can save you anywhere from a few hundred or a few thousand dollars on your taxes.
Child Tax Credit
Families with children can claim up to $2,000 per qualified child with the Child Tax Credit. There are income cutoffs, but they start at $200,000 for single filers and $400,000 for married filers. This is a refundable credit, so you can receive up to $1,400 per child as a refund.
Due to the pandemic, many Americans found themselves without work for a period of time due to the shutdown of a large segment of the economy. If you didn't opt to have taxes withheld from your benefits when you signed up, you can pay quarterly estimated taxes, or set aside enough money from your benefits to pay your taxes on Tax Day.