Regardless if you filed your 2019 taxes or not, it is not too early to start planning your 2020 taxes that are due April 15, 2021. There were many tax changes that are making this one of the most drastic differences between filing years in quite some time. The earlier you decide to educate yourself on the changes to tax laws, the more time you will have to prepare and take advantage of these new conditions. Not to mention, there are always advantages to filing your taxes early, which King Financial Services will gladly help you with!
Listed below are some of the main differences you can expect when filing your taxes in 2021 than in previous years you have filed:
Higher HSA Limits: A change that affects your taxes almost every year is the contribution limits for health savings accounts (HSAs). Due to inflation, you can expect this same pattern to continue for your 2020 tax return. Listed below are the contribution limits for HSA-eligible workers with high-deductible health insurance policies:
- Self-only coverage: $3,550 — ($50 increase from the previous years’ return)
- Family coverage: $7,100 — ($100 increase from the previous years’ return)
Changes to Charitable Deductions: In efforts to incentivize U.S. citizens to donate money to charity during the ongoing pandemic, the IRS is allowing you to deduct as much as $300 in cash contributions that were made during 2020, even for those who file under a standard deduction. This tax change was also included in the CARES Act. In previous years, taxpayers have been allowed to write off tax-deductible charitable donations on their federal tax returns if they itemize deductions, but not in cases where they took a standard deduction. If you choose to itemize deductions for your 2020 tax return, you aren’t subject to the $300 limit for charitable contributions. In addition, you can elect to deduct cash contributions made in 2020 of up to 100% (increased from 60%) of your adjusted gross income (AGI).
Waived Required Minimum Distributions: The CARES Act waived the required minimum distributions (RMDs) for 2020 tax returns. In previous tax years, they were considered taxable income. This could mean that some retirees will have lower taxable incomes, thus owe less in federal income taxes in 2021.
Higher Income Brackets: Tax brackets typically change from tax year to tax year, generally due to inflation. The tax rates didn’t change for your 2020 tax return, however, the tax bracket amounts were adjusted to account for inflation over the year.
For 2020, the income brackets for single filing status, according to the IRS, is:
- 37% tax rate: Applies to taxable income of more than $518,400
- 35%: More than $207,350 but not more than $518,400
- 32%: More than $163,300 but not more than $207,350
- 24%: More than $85,525 but not more than $163,300
- 22%: More than $40,125 but not more than $85,525
- 12%: More than $9,875 but not more than $40,125
- 10%: Income of $9,875 or less
For married filing jointly, there are the 2020 income tax rates:
- 37% tax rate: Applies to taxable income of more than $622,050
- 35%: More than $414,700 but not more than $622,050
- 32%: More than $326,600 but not more than $414,700
- 24%: More than $171,050 but not more than $326,600
- 22%: More than $80,250– but not more than$171,050
- 12%: More than $19,750– but not more than $80,250
- 10%: Income of $19.750 or less
View more related information about IRS withholding tax tables for 2020 tax returns.
New Standard Deduction Amounts: Standard deductions reduce your taxable income amount, and they typically increase each year due to inflation. For 2020 taxes due in 2021, the standard deduction amounts (based on tax filing status) are:
- Married filing jointly: $24,800 — up $400 from 2019 tax returns
- Married filing separately: $12,400 — up $200 from 2019 tax returns
- Head of household: $18,650 — up $300 from 2019 tax returns
- Single: $12,400 — up $200 from 2019 tax returns
King Financial Services in Fort Worth
Don’t get lost in the paperwork that comes along with running a business, instead reach out to King Financial Services. Our team of financial professionals understands how overwhelming it can be to you and your staff to keep up with additional tasks and record keeping. This is why we help eliminate the workload that comes with bookkeeping in house by managing all of the additional responsibilities, such as payroll and bookkeeping. Contact us today to learn more about the tax and financial services we offer. Sandra King is an enrolled agent, empowered by The United States Treasury to prepare your personal or business tax filing. While her services are offered nationwide, Sandra King locally serves the greater Dallas-Fort Worth area, including but not limited to Arlington, Bedford, Colleyville, Euless, Fort Worth, Grand Prairie, Hurst, Mansfield, North Richland Hills, and Richland Hills.
King Financial Services Inc
610 S Industrial Blvd. Suite 140
Euless, TX 76040
Phone: (800) 503-1343