41 Federal Tax Changes for 2021

Many of us are playing ‘catch up’ on tax planning for 2021 and that means a greater risk of paying more than is necessary. The tax filing season for 2020 ended two days ago and so that means that tax professionals like me are suddenly devoting 100% of our efforts to reducing clients’ tax bills in for the current year in the 75 days that we have remining in the current year.

This is a list, not an explanation, of federal tax changes* effective in 2021.

1. Child tax credit
2. Third round stimulus
3. Dependent care credit
4. Dependent care FSAs
5. Charitable cash donations deduction
6. Health insurance premium tax credit
7. Earned income tax credit
8. Student loan debt forgiveness
9. College tuition deduction
10. Medical expense deduction
11. Commercial building energy improvement deduction
12. Motor sports complex and race horse depreciation
13. Alcohol excise taxes
14. New market and work opportunity tax credits
15. Family leave and medical care to workers credit
16. Employee retention credit
17. Home debt forgiven
18. Residential window and door credit
19. Commercial energy incentives
20. Student debt paid by employer
21. Business meal deduction
22. FSA carryover amount
23. Maximum business loss deduction for individuals
24. Maximum deduction for executive pay
25. 1099 threshold amount
26. Tax bracket amounts
27. Standard deduction amount
28. Tax brackets for capital gains
29. AMT exemption amount
30. Maximum estate and gift tax exemption
31. Standard mileage deduction amount
32. Qualified business income flow through amount
33. Maximum business capital item amount that can be expensed
34. Income exclusion for income earned outside of U.S.
35. Social security wage base
36. Maximum H S A contribution
37. H S A qualifying insurance change
38. Long term care premium deduction
39. Maximum tax free bond interest used for education
40. Lifetime learning credit
41. Business paid adoption expenses deduction

Of course, a change in tax law does not necessarily mean an increase or a decrease in your taxes for 2021. But it does mean that a review of these changes before year end could help reduce total tax liability for the year. Generally, we advise creating an early ‘pro forma’ version of your tax return as soon as possible to see how these changes and other strategies could affect your tax liability.

*This list does not include changes to state and local taxes.