Tax Information for Professionals

Tax Information for Professionals

Questions and Answers For Tax Professionals
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2022 FILING SEASON CHANGES FOR 2021 TAX RETURNS

  1. Due Date for 2021 Returns
  2. Increased Standard Deduction
  3. Personal Exemption
  4. Tax Rates
  5. Itemized Deduction Limits
  6. AMT Exemption
  7. HSA Contribution Limits
  8. Child Tax Credit
  9. Child & Dependent Care Tax Credit
  10. Recovery Rebate Credit (3rd stimulus)
  11. RMDs are Back
  12. Earned Income Tax Credit (EITC)
  13. Unemployment Exclusion
  14. Charitable Contributions
  15. Forgiven Student Loan Debt
  16. Gift Tax Exclusion
  17. Education Tax Benefits
  18. Premium Tax Credit


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Due Date for 2021 Returns
The due date to file your 2021 income tax return or extension form is April 18, 2022. The due date is April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia - even if you don't live in the District of Columbia. If you live in Maine or Massachusetts, you have until April 19, 2022. That is because of the Patriots' Day holiday in those states.
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Increased Standard Deduction
For the 2022 tax season, the standard deduction amounts will be increased slightly as in previous years. The new amounts for 2021 tax returns are below. The increased standard deduction will continue to allow more individuals to file without itemizing deductions on Schedule A.
FILING STATUS STANDARD DEDUCTION AMOUNT
Married Filing Joint; Qualified Widower$25,100
Single; Married Filing Separate$12,550
Head of Household$18,800
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Personal Exemption
The personal exemption for tax year 2021 remains at 0, as it was for 2020; this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
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Tax Rates
For tax year 2021, the top tax rate remains at 37%. All other rates are below based on taxable income levels.
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Tax Rate Single Taxable Income MFJ Taxable Income HOH Taxable Income
37% $526,600 and higher $628,300 and higher $523,600 and higher
35% Over $209,425 Over $418,850 Over $209,400
32% Over $164,925 Over $329,850 Over $164,900
24% Over $86,375 Over $172,750 Over $86,350
22% Over $40,525 Over $81,050 Over $54,200
12% Over $9,950 Over $19,900 Over $14,200
10% Less than $9,950 Less than $19,900 Less than $14,200

Itemized Deduction Limits
There is no limitation on itemized deductions for 2021 tax returns (just as 2018-2020). The limitation was eliminated by the Tax Cuts and Jobs Act.
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AMT Exemption
The Alternative Minimum Tax exempt for 2021 is $73,600. The exemption begins to phase out at an AGI over $523,600 for single taxpayers. The exemption for MFJ taxpayers is $114,600 and begins to phase out with an AGI over $1,047,200.
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HSA Contribution Limits
The HSA contribution limit for 2021 has increased to $3,600 for single coverage and $7,200 for family coverage.
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Child Tax Credit
For 2021 only (pending any further legislation), the child tax credit has increased to $3,000 (additional $1,000) per child. For children 5 years old and younger, the credit is $3,600 (additional $1,600) per child. Also, for 2021 only, children who are 17 qualify for the child tax credit.
The additional amounts ($1,000 and $1,600) start to phase out for individuals with higher incomes. For people filing their tax return as a single person, the extra amount starts to phase-out if their adjusted gross income is above $75,000. The phase-out begins at $112,500 for head-of-household filers and $150,000 for married couples filing a joint return. The credit amount is further reduced under the pre-existing $200,000/$400,000 phase-out rules.
For 2021, the child tax credit is fully refundable, eliminating the $2,500 earned income requirement.
Lastly, half of the 2021 credit amount will be paid in advance through monthly payments starting on July 15 (unless you opt out at the following website Sign In (irs.gov)). You'll claim the other half of the credit on your 2021 tax return. Then you will have to reconcile the monthly payments that you receive from the IRS in 2021 with the child tax credit that you are actually entitled to claim when you file your 2021 return. This reconciliation will be completed on Form 8812.
Taxpayers who received advance child tax credit payments should get a letter in the mail in January that shows the amount received; this will be used on Form 8812. If the credit amount is more than the total monthly payments, you can claim the excess credit on your return. But if the credit amount is less than the payments, you may or may not have to pay the excess back.
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Child & Dependent Care Tax Credit
For 2021 only (pending any further legislation), the child and dependent care tax credit has also been revamped. The credit is fully refundable for 2021. The maximum credit percentage increases to 50% from 30%. You can claim up to $8,000 in expenses per child/disabled person and up to $16,000 for more than 1 person. Also, the full credit amount will be allowed for families making up to $125,000 for year. Families making between $125,000 and $438,000 will receive partial credit.
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Recovery Rebate Credit (3rd stimulus)
The American Rescue Plan Act authorized a third round of stimulus checks. Those checks were for $1,400, plus an additional $1,400 for each dependent in your family. However, these payments phased out much more quickly than previous payments. The payments were reduced to zero if your AGI was above $160,000 (joint filers), $120,000 (head-of-household), or $80,000 (singles). Just as in 2020, taxpayers will have to reconcile the payment they received. If too little payment was received, the additional amount can be claimed on the 2021 return. If too much payment was received, the excess will not have to be paid back.
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RMDs are Back
Any person 72 or older by the end of 2021, will be required to take a minimum distribution from their retirement account or be penalized. The RMD suspension was only for 1 year. Contribution limits for retirement plans remained the same for 2021 as 2020.
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Earned Income Tax Credit (EITC)
For 2021 only (pending further legislation), the EITC has been expanded for childless workers. The age limitation has been lowered to 19 (except for certain full-time students). It also eliminated the maximum age limit. The maximum credit available for childless workers is also increased from $543 to $1,502 for 2021 only.
As with the 2020 EITC, you can elect to use your 2019 earned income instead of your 2021 income if that will boost your credit amount.
The investment income limitation is also increased from $3,650 to $10,000 and will be adjusted by inflation for years after 2021.
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Unemployment Exclusion
The $10,200 exclusion for unemployment income was only for 2020 (pending further legislation). Therefore, the entire amount of unemployment benefits received in 2021 will be taxable on your federal income tax return.
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Charitable Contributions
The $300 above the line deduction for cash contributions was originally set to expire after 2020 returns. However, the deduction has been extended to 2021 returns with one important update. Previously, the deduction was capped at $300 per return; for 2021, the deduction will be capped at $300 per taxpayer. This means MFJ returns will have the ability to claim a $600 deduction for cash contributions.
The 60% of AGI limitation for charitable contributions has also been suspended for 2021.
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Forgiven Student Loan Debt
Starting in 2021, most student loan debt incurred for post-secondary education that is forgiven will not be considered taxable income. The rule allowing workers to exclude up to $5,250 of college loans paid by their employer in 2020 from taxable wages was also extended through 2025. The $5,250 cap applies to both student loan repayment benefits and other educational assistance offered by an employer.
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Gift Tax Exclusion
The gift tax exclusion remains $15,000 per recipient for 2021. This means you can give up to $15,000 ($30,000 if your spouse agrees) to each child, grandchild or any other person in 2021 without having to file a gift tax return or tap into your lifetime estate and gift tax exemption. The lifetime estate and gift tax exemption increased to $11.7 million for 2021 ($23.4 million for couples if portability election is timely made).
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Education Tax Benefits
Starting with 2021, the Tuition & Fees Deduction has been eliminated. However, to help with the loss of the Tuition & Fees deduction, the phase-out thresholds for the Lifetime Learning credit were permanently increased. The phase out thresholds now mirror the American Opportunity credit.
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Premium Tax Credit
The suspension of repaying excess premium tax credits was only for the 2020 tax year (pending further legislation). What that means for 2021 is if you receive an excess of premium tax credit for your health insurance premiums, you will have to pay back that amount with your 2021 tax return.
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