Here are some of the changes for 2021 Tax Year
American Rescue Plan (ARP) of 2021. The following ARP provisions affect tax year 2021.
- Child and dependent care credit increased.
- Self only earned income credit EIC expanded.
- Child tax credit expanded / advance payments of the child tax credit.
Due date of return. File Form 1040 or 1040-SR by April 18, 2022. Due to the Emancipation Day holiday.
Economic impact payment—EIP 3. Any economic impact payment you received is not taxable for federal income tax purposes but will reduce your recovery rebate credit.
2021 Recovery rebate credit. This credit is figured like last year’s economic impact payment, EIP 3, except eligibility and the amount of the credit are based on your tax year 2021 information. (Call us for more details.)
Standard deduction amount increased. The standard deduction amount has been increased for all filers. The amounts are:
Single or Married filing separately $12,550.
Married filing jointly or Qualifying widow(er) $25,100.
Head of household $18,800.
Virtual currency. If, in 2021, you engaged in a transaction involving virtual currency, you will need to answer “Yes” to the question on page 1 of Form 1040 or 1040-SR. This question must be answered by all taxpayers, not just taxpayers who engaged in a transaction involving virtual currency.
Changes to the earned income credit (EIC).
- EIC rules for taxpayers without a qualifying child.
- EIC rules for taxpayers with a qualifying child.
- Phaseout amounts increased.
- Rules for separated spouses.
- Investment income limit increased.
Contact PG Tax Services today for more information.