5 Ways Your 2021 Taxes Will Change

Dear Clients,

Planning for 2020 tax season. Here are 5 helpful tips you should know:

1) California instates Health Care Mandate

If you are living in California, having qualifying health coverage is the law for the tax year 2020 subject to a state tax penalty. For example, for the average family of four going the entire year uninsured, penalties could start at $2,250. Other states instituting penalties include Massachusetts, New Jersey, Rhode Island, and District of Columbia. (https://www.ftb.ca.gov/about-ftb/newsroom/health-care-mandate/tax-professionals.html)

2) IRS offers tax inflation adjustments

For the calendar year 2020 the new tax brackets are listed below:

· 37% for individual single taxpayers with incomes greater than $518,400

· 35% for incomes over $207,350

· 32% for incomes over $163,300

· 24% for incomes over $85,525

· 22% for incomes over $40,125

· 12% for incomes over $9,875

(https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2020)

3) Charitable donations deduction available to everyone

To promote contributions to charities during this ongoing Coronavirus pandemic the CARES Act institutes up to a $300 deduction even if you opt for the standard deduction.

4) Increased 401(k) & HSA contributions

For individuals 50 years and older the catch up 401(k) contribution for 2020 was raised from $6,000 to $6,500 bring the total year contribution to $26,000. In addition, Health Savings Accounts for self-coverage increase from $3,500 to $3,550 and family coverage increases from $7,000 to $7,100.

5) No Federal individual mandate penalty

Failure to obtain health insurance for the year of 2020 will not result in a penalty fee on your federal tax return. However as mentioned above please be aware that there are several states enforcing a state tax penalty.

As always, we hope you and your family are well and we are here to help you in any way we can!