The pandemic of 2020 created many new tax laws and extensions that will continue to affect tax preparation and filing for the next 2021 income taxes. Additionally, there are other new laws enacted through the current administration that present some future challenges and opportunities to prepare for, while other special provisions have expired. Avoid costly mistakes by integrating this information into your 2021 tax plan.
Law Changes, Phase-outs and Inflation Adjustments for 2021
- The Consolidated Appropriations Act – This act includes many extensions of credits, deductions and tax relief provisions that were due to expire. These will remain for 2021:
- Tax credit advance payments of $600/taxpayer and qualifying children with income limits.
- Business 100% meal expense deductions
- $250 PPE deductible expense for qualified teachers
- $300 charitable standard deduction per taxpayer
- Expenses paid via forgiven PPP loans are fully deductible
- Inflation Adjustments – Income tax brackets and standard deductions will be adjusted for inflation.
- Credit Phase-out adjustments and Deductions – Maximum credits, alternative minimum tax and IRA contributions will have increased phase-out limits.
- Retirement plan distribution changes – The CARES Act allowed covid-impacted individuals to withdraw $100,000 from retirement programs without penalty and loosened RMDs requirements. This remained through 2020 but has yet to be reenacted by Congress for 2021.
- Expired Cares Act Provisions – The state-funded unemployment provisions for covid-impacted workers and self-employed individuals was extended from 26 weeks to 39 weeks, but so far, look to expire by the end of December 2021. Additional federal provisions that should expire by or before the end of December 2021 include banning evictions and allowing federal student loans to be paused.
Plan For Your 2021 Taxes Now
Knowing the tax law changes early in the year allows businesses and individuals to make better tax liability decisions. There are many opportunities to take advantage of, while also being careful to know what provisions are expired. Not acting according to these tax changes could be costly. Synergi Partners provides their clients with the latest information regarding tax laws amid a confusing, changing post-pandemic tax landscape. If you have questions about your 2021 tax plan, don’t wait another day to contact us.