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.