What another crazy tax season! Mid-season tax law changes! Increased IRS bureaucratic gridlock! Small changes that only apply to one or two years! And what about those proposed tax law changes!? As we enter the second half of 2021 the stress of tax uncertainty continues! But there is good news … The stress of filing taxes can be alleviated with good planning.
Here are a few items to pay attention to in 2021:
- 100% of business meals purchased from restaurants are deductible for 2021 & 2022. In the past this deduction was limited, and usually not allowed.
- Student loan debt forgiveness is not taxable for years 2021-2025.
- Decrease in standard business mileage from 57¢ to 56¢
- The child tax credit has increased from $2,000 per child to $3,600 for kids under 5 and $3,000 for kids 5-17. Some taxpayers will begin to receive an advanced payment of this between $300-$350 a month per child from July- December 2021. This credit phases out between $150,000-$400,000 for Married Filing Joint couples.
- For 2021 the child and dependent care credit has been increased. You can now claim $8,000 per kid and $16,000 per household in qualified expenses, up from $3,000 per kid and $6,000 per household. This credit is fully refundable and phases out between $125,000-$438,000 for Married Filing Joint couples.
No item on your tax return stands alone and it is important to understand how the pieces of your unique tax situation fit together.
If you are confused about what your taxes will be in 2021, then we should look at 2021 now. We can shed clarity on the year, answer questions, and run estimates for self-employment income, unemployment income, capital gains, and various economic stimulus items.
We recommend you do midyear income check if you’ve experienced any of the following:
- Self-employment income
- Unemployment income
- Change in income, decrease or increase
- Sale of real estate
- Sale of inherited property
- Sale of investments
- Investment income
- Distributions from your retirement accounts
- Cancelled debt
Shoebox Tax Prep is here throughout the year to your tax questions. Like you, we hate tax related surprises and with early planning you too can avoid tax time pain and money drain.