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.
- Child tax credit
- Third round stimulus
- Dependent care credit
- Dependent care FSAs
- Charitable cash donations deduction
- Health insurance premium tax credit
- Earned income tax credit
- Student loan debt forgiveness
- College tuition deduction
- Medical expense deduction
- Commercial building energy improvement deduction
- Motor sports complex and race horse depreciation
- Alcohol excise taxes
- New market and work opportunity tax credits
- Family leave and medical care to workers credit
- Employee retention credit
- Home debt forgiven
- Residential window and door credit
- Commercial energy incentives
- Student debt paid by employer
- Business meal deduction
- FSA carryover amount
- Maximum business loss deduction for individuals
- Maximum deduction for executive pay
- 1099 threshold amount
- Tax bracket amounts
- Standard deduction amount
- Tax brackets for capital gains
- AMT exemption amount
- Maximum estate and gift tax exemption
- Standard mileage deduction amount
- Qualified business income flow through amount
- Maximum business capital item amount that can be expensed
- Income exclusion for income earned outside of U.S.
- Social security wage base
- Maximum H S A contribution
- H S A qualifying insurance change
- Long term care premium deduction
- Maximum tax free bond interest used for education
- Lifetime learning credit
- 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.
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