Every year the IRS makes inflation adjustments, but this year there are additional tax law changes due to the pandemic. If you received unemployment benefits for the first time this year, you may not know that it’s considered taxable income by the IRS. Unless you requested to have taxes withheld or made estimated payments, you may owe money when you file in 2021. Here are some other things to expect this upcoming season.
You may qualify for the new Recovery Rebate Credit
Millions of Americans received an Economic Income Payment earlier this year. It was worth $1,200 plus $500 per qualifying child. Since it was based on your 2018 or 2019 tax information, some people didn’t receive the correct amount. If you didn’t receive the full amount you deserved, you can claim the Recovery Rebate Credit on your tax return. ezTaxReturn makes it easy to get every tax break the IRS allows so you get the biggest possible refund, guaranteed.
The Earned Income Tax Credit (EITC) will be worth up $6,660
EITC recipients may get more money when they file their taxes in 2021. The credit is worth up to $6,660, depending on the number of qualifying children claimed on your return. You can still qualify for the EITC without children, but expect a much smaller credit amount.
New standard deduction amounts
Most people choose the standard deduction when filing their taxes. It’s easier than itemizing and can save you more money. For tax year 2020, you can expect a slight increase in the standard deduction amounts.
- Single – $12,400 (up $200 from last year)
- Married filing jointly – $24,800 (up $400)
- Married filing separately – $12,400 (up $200)
- Head of household – $18,650 (up $300)
Higher income tax brackets
The tax rates haven’t changed, but the income limits were adjusted. Here are the tax brackets for those filing single:
- 10% on income of $9,875 or less
- 12% on income from $9,876 to $40,125
- 22% on income from $40,126 to $85,525
- 24% on income from $85,526 to $163,300
- 32% on income from $163,301 to $207,350
- 35% on income from $207,351 to $518,400
- 37% on income of $518,401 or more
To see the 2020 federal tax brackets for all filing statuses, click here. When you use ezTaxReturn, you don’t need to know a thing about tax brackets. We ask simple questions and do the math for you. 100% accurate results guaranteed.
There’s a new $300 deduction for making cash donations to charity
Most taxpayers will be able to deduct cash donations up to $300 without itemizing. Cash donations includes those made by check, credit card or debit card. Always do your homework before giving. Make sure it’s a legitimate organization and find out how your money will be spent. Unfortunately, the rule change is only for 2020 so take advantage while you can.
2020 required minimum distributions were waived
The CARES Act waived required minimum distributions (RMD) from retirement accounts for 2020. Retirees who skip their RMD may find themselves with a smaller tax bill.
Refund interest must be reported on your tax return
Since the tax deadline was postponed due to COVID-19, the IRS was required to pay refund interest to anyone who filed between April 15th and July 15th. Nearly 14 million people received the interest payment which averaged around $18. The interest payments are taxable and must be reported when you file your tax return. If you received at least $10 in interest, expect to receive a Form 1099-INT from the IRS.