There are more reasons than ever to Feb. 12, while continuing to process last year’s missing — but those checks aren’t the only thing that may shake up your return this year. The IRS has adjusted individual income tax brackets for inflation and, with last year’s , changed many rules concerning charitable deductions, IRA and 401(k) plans and student loans. You may have to navigate some of those to hit that .. The IRS started processing 2020 returns on
“This year’s tax season will be unusually busy for both taxpayers and the IRS, as many aspects of the coronavirus relief measures passed in 2020 will affect our tax returns,” says Garrett Watson, senior policy analyst at the Tax Foundation.
The upside: The earlier you file your taxes, the sooner you could get a new stimulus check and speed up the delivery of any missing money you’re owed. “The IRS is encouraging taxpayers to file electronically to avoid delays in processing paper returns, as the agency is still digging out from a large paper correspondence backlog from last year,” Watson says.
With that in mind, here is everything you need to know about the major tax changes for 2020. And if you need help navigating the process and filing electronically, make sure to check out our picks for.
First, some good news. If you received afrom the March CARES Act or the December stimulus bill, that does not count as taxable income, and will not impact your return. Nor will those payments count as income for determining whether you’re eligible for federal government assistance or benefit programs. ( .)
Missing stimulus payment claims
If you were eligible to collect all or some of theper person or the per person, but it never arrived (or didn’t accurately reflect your ), you can claim your missing money on your 2020 tax return as a . This credit will either increase the size of your total tax refund or lower the amount of taxes you owe.
You’ll file for the 2020 Form 1040 or Form 1040-SR to claim a catch-up stimulus payment. The IRS’s Recovery Rebate Credit Worksheet can help you determine whether you’re missing a payment and, if so, for how much. We’ve got full instructions on .on the
If you don’t usually file taxes — perhaps you’re IRS’ Free File program, and shouldn’t have to pay to file a federal return., on or don’t meet the required income threshold — but believe you’re owed stimulus money, you’ll need to file a 2020 return. Our step-by-step guide explains exactly . Note that nonfilers are often eligible for the
Income tax brackets
For the tax year 2020, the standard deduction is $12,400 for single filers (an increase of $200) and $24,800 for married couples filing jointly (an increase of $400). For heads of households, the standard deduction is $18,650 (an increase of $300). These increases are inflation adjustments. (Learn more.)
Charitable donation deductions
Employers can now contribute up to $5,250 per year toward an employee’s student loan debt — and it’s tax-free for both employer and employee, as long as it’s for payments made from March 27, 2002, through Dec. 31, 2020. (Learn more.)
IRAs and retirement plans
The Learn more.)for IRAs and retirement plans for 2020. Since those RMDs count as taxable income, if you didn’t take the distribution, it’s like getting a tax break. (
Earned Income Tax Credit
Designed to benefit people with lower incomes, this tax credit can reduce your taxable income and wages. Under the Taxpayer Certainty and Disaster Tax Relief Act of 2020, part of the, you can use your 2019 or 2020 amount of earned income to calculate your tax credit for 2020 — a potentially important provision for people who lost their jobs amid the pandemic. (The higher the income, the larger the tax credit.)
One thing to note: If you claim this credit, the IRS may request additional information, which could result in your refund being delayed.
Child Tax Credit
Similar to the Earned Income Tax Credit, theis designed to benefit working families by allowing them to claim up to $2,000 per qualifying child via a refundable credit. But this year, you can use your 2019 earnings instead of 2020 to determine your eligibility for the Child Tax Credit, increasing the total amount of refundable credits you can receive for qualified children under the age of 17.
You can use this IRS tool to determine if your child or dependent will qualify for the credit. As with the Earned Income Tax Credit, claiming this credit may trigger a request for additional information, which could delay your refund.
Health flexible spending
If you have a health flexible spending plan, good news: The limit for tax-free contributions has increased to $2,750 — up $50 from last year. (Learn more.)
Some medical expenses are tax-deductible — and Congress passed a more generous allowance for what you can deduct as part of the December stimulus bill. Instead of capping expenses that exceed 10% of your Learn more.), as was originally planned, you can now deduct medical expenses that exceed 7.5% of your AGI. Great! (
Can I deduct any work-from-home expenses?
Nope — Tax Cuts and Jobs Act suspended tax write-offs for home office deductions through 2025. Note that this could change next year if Congress opts to deliver more tax relief in future relief legislation.. The
You can find more details about all of these tax changes on the IRS website, and CNET’s team has prepared , including a series of articles covering the 2020 tax season from every angle.
More tax advice for 2021
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