2021 New Tax Changes from the IRS

What You Need to Know...

by Doug Benefield, CPA
& Tammy Long, CPA 
Founders, Elevated CPA
elevatedcpasolutions.com

​Now that January is here, it is that time to start thinking about your tax returns. As experienced certified public accountants, we know how stressful tax returns can be for you. It doesn’t have to be that way! Working with a trusted tax advisor can help alleviate your concerns. We have more than 20 years of experience helping small businesses remain tax compliant and minimize their tax liability. We know small business!
The IRS has implemented a few changes to your individual tax return that you will want to know about. The information below should answer questions and relieve at least some of your stress around tax filing. Most of the information below is subject to income limitations and/or phaseouts. 

2021 Capital Gains 
Tax Brackets
Rates remain unchanged from 2020, however income thresholds were adjusted for inflation.

2021 Standard 
Deductions
The amount that taxpayers can deduct from taxable income if they are not itemizing deductions:
•$12,550 for single filers
•$12,550 for married filing separately filers
•$18,800 for head of household filers
•$25,100 for married filing joint filers
•$25,100 for surviving spouse filers

Child Tax Credit – refundable credit
Your child tax credit increased from $2,000 to $3,000 for most children ($3,600 for children 5 years old and younger). An important note: If you received advance payments starting in July, these payments will reduce your credit on the tax return. 

Child and Dependent Care Tax Credit – refundable credit
Up to 50% credit is allowed for up to $8,000 in expenses for one child/disabled person and $16,000 for more than one.

3rd Recovery Rebate Credit
If you qualified, you should have received your 3rd and final recovery rebate payment. If not, there is an opportunity to claim your rebate on your 2021 tax return.

Charitable Donations
Individuals who take the standard deduction will be allowed a charitable deduction up to $300 for individuals and $600 for married filing joint filers. If you itemize your deductions, you can deduct up to 100% of your adjusted gross income – this is a temporary limit suspension. The donations must be cash, made to a qualifying organization and made during the 2021 calendar year.

Business Deductions
•100% deduction for business meals (not limited to 50% as in prior years)
•Mileage rate decreased to 56 cents/mile (was 57.5 cents/mile in 2020)

Items to save for your 
tax accountant

•W2’s
•1099 statements (1099-Misc, 1099-R, 1099-SSA, 1099-DIV, 1099-INT, 1099 consolidated brokerage statements)
•Business income and expense records
•Mortgage interest statement (form 1098)
•Property taxes paid
•Charitable donation receipts
•Medical expenses (only deductible portion is amount that exceeds 7.5% of adjusted gross income)
•3rd round of recovery rebate payments received
•Advance child credit payments received
•Self-employed health insurance premiums paid
•Long-term care premiums paid
•Retirement plan contributions (form 5498)
•Form K-1 from business returns/investments

Additional tax deductions/credits available that you may qualify for include: student loan debt forgiveness; child adoption tax credit; education expense deduction; long-term care insurance premium deduction; health-savings account deduction; premium tax credit for health insurance premiums; energy credits; 20% deduction for pass-through income. 

Not ready to deal with tax filing yet, we can always help you file a six-month extension, just make sure you have paid the correct amount in estimated taxes to avoid a penalty. Discussing with a trusted tax advisor will ensure you get the most deductions/credit available to you!

Doug Benefield, CPA & Tammy Long, CPA Founders, Elevated CPA