Tax season will be different this year. Here’s what you need to know

Taxes is one of those things that always seem to change from year to year. And, this year is certainly no different.

From tax bracket tweaks to COVID-related tax credits, there is a lot that tax filers should keep in mind before submitting their 2020 taxes. 

Here is what you need to know about tax changes in 2020-2021. 

The tax deadline has been pushed to May 17th

Due to Coronavirus concerns and uncertainty, the IRS has extended the tax filing deadline to May 17th this year.

You may recall that in 2020, the IRS extended the tax-filing deadline to July 15 to account for COVID-19. 

Changes to the tax brackets

According to Kiplinger, the tax bracket ranges have been widened to account for inflation between September of 2018 and August of 2019.

There are seven different tax brackets in the IRS tax code, including 10%, 12%, 22%, 24%, 32%, 35% and 37%, ranging from low incomes to incomes over $518,000 a year. 

Standard deductions have increased

For 2020, the standard deduction has increased by $400 for married couples ($24,800), plus $1,300 for each spouse 65 years or older.

Single individuals’ standard deduction has increased by $200, to $12,400.

Income thresholds for capital gains have gone up

For instance, individuals with a taxable income up to $40,000 are able to claim a 0% tax rate on capital gains, a $625 increase from 2019.

Student loan interest deductions

“The student loan interest deduction lets you deduct up to $2,500 from your taxable income if you paid interest on student loans in 2020,” writes Nerd Wallet.

To see if you qualify for a student loan interest deduction, use this IRS tool. 

Employer-paid student loan repayments

While we are on the subject of student loans, tax law now allows employers to pay up to $5,250 in employee student loans.

If you have student loans, ask your employer if this benefit is applicable to you. 

Charitable deductions are better

The CARES Act boosted the charitable deduction allotment for the tax year 2020. The AGI limit on cash donations has been removed.

And, $300 of charitable cash donations can be written-off without itemization.

Self-employed sick leave

Federal law requires employers to provide sick leave for employees affected by the virus.

The Families First Coronavirus Response Act extended that benefit with tax credits for those who were self-employed and unable to work due to the virus in 2020.

Child adoption tax credit

If you adopted a child in 2020, the IRS will give you a $14,300 adoption credit, which is an increase of $220 from the tax year 2019).

Note that the child adoption tax credit phases out beginning at $214,520 in taxable income. 

Teacher expenses for COVID protection

In 2020, educators can deduct up to $250 of unreimbursed costs for COVID protective equipment (ie: masks, cleaning supplies, etc) that was spent after March 12th of that year. If both spouses in the household are educators, they are both eligible for the $250 tax credit ($500 in total).  

If you are unclear about any of these changes, talk to a qualified tax accountant, visit the IRS website, or call the IRS for help.

For more information about specific IRS changes as a result of Coronavirus, visit the IRS’ Coronavirus Tax Relief page.