The U.S. Treasury Department and Internal Revenue Service (IRS) announced that the deadline for filing federal income taxes will automatically extend to May 17, 2021.
This additional time reflects the later-than-usual start to this year’s official filing season. But it also intends to make it easier for taxpayers to navigate new and modified filing considerations tied to the year’s coronavirus pandemic relief policies.
Understanding how recent updates to tax laws and regulations impact your return ensures a smoother filing process — saving you time, headaches, and the risk of surprise penalties.
Filing taxes 2021: What you need to know.
The percentage of your income that you owe in taxes — or your tax rate — is based on which income bracket you fall into. In 2021, the income limits for each bracket increased slightly to account for inflation. For those claiming a standard tax deduction in 2020 rather than itemizing individual deductions, this amount also rose.
Tax deductions are the expenses subtracted from your total income, reducing the total that’s subject to tax. In addition to common deductions like small business or self-employment expenses you may qualify for, legislation has expanded:
- Charitable deductions: you can claim up to 100% of your adjusted gross income (AGI) if you itemize your deductions — or up to $300 if you claim the standard deduction
- Medical deductions: you can claim any medical expenses above 7.5% of your AGI as a deduction
There are also tax credits available to eligible individuals that can reduce your total tax bill or generate a refund. You may be able to claim credits like the:
- Earned Income Tax Credit (EITC) if your taxable income was higher in 2019 than in 2020
- Child Tax Credit of up to $2,000 per child
- Lifetime Learning Credit for qualified tuition and related expenses, worth up to $2,000 per tax return
