Your Guide to Some of the Latest Income Tax Changes

2020 was a year greatly affected by the Coronavirus pandemic and its implications. Thus, it just makes sense that some relevant tax changes were made for 2021, as well as some general, non-COVID changes. Regardless of the reasons for the latest tax revisions, it’s important for you to be aware of these changes and how they may affect you so that, when possible, you can use them to your advantage.  

Get Rewarded for Being Charitable  

In the recent past, charitable donations only counted for a federal tax deduction if you itemized your deductions. For 2021, however, all taxpayers are eligible to deduct for financial donations up to certain amounts. Those who take the standard deduction can deduct up to $300, while those who itemize don’t face the same caps they have in previous years.  

These changes are a direct result of the coronavirus and the increased need for more people to donate and help others.  

Changes to Marginal Income Tax Brackets  

There have also been some changes to the income tax brackets, which is common and not directly related to the pandemic. However, it’s important for you to check these new brackets, in relation to your filing status and income, to determine if you’re in the same bracket or a different bracket than you were last year. Due to COVID, many people may find themselves in a lower tax bracket, which would mean lower taxation.  

Contributions to Health Savings Accounts

If you were hoping to contribute a little more to your health savings account, you’re in luck! Contribution limits were raised this year.

Those with self-only coverage can now contribute $3,600, instead of last year’s $3,550. And, those with family coverage can now contribute an extra hundred dollars, for a total contribution limit of $7,200.

While this might seem like a lot of changes, it barely scratches the surface! To ensure you are aware of all tax changes and how they may affect you, work closely with a tax professional. This is the best way to offset any changes that might affect you negatively and to take advantage of any and all changes that could affect you positively.