What You Need to Know about Recent Tax Law Changes

There have been 3 new tax laws passed in the last 12 months!  That is unheard of in recent history.  So, what are the major takeaways you need to know?  Here is a short list of the most important elements of the new tax laws that may impact you:

• If you do not itemize deductions, you can deduct $300 of cash charitable donations on your 2020 tax return.  In 2021, the amount is increased to $600 for joint tax returns. 

• The first $10,200 of unemployment compensation will not be taxed for 2020.  This is at a federal level.  Many states have not yet decided how they will handle unemployment. 

• For 2021, the child tax credit has been increased to $3,000 per child ($3,600 under age 6).  There will be advanced payments of this credit (to be worked out by the Treasury department).

• For 2021, the dependent care credit (i.e. daycare expenses) has been increased to $4,000 per child.

• Student loans forgiven or cancelled between January 1, 2021, and December 31, 2025 are not included in taxable income.

• The medical expense deduction has been permanently lowered to 7.5% of AGI. 

• There have been 3 different stimulus payments.  If you did not receive the first two, you can claim a credit on the 2020 tax return.  If you do not receive the 3rd, you can claim a credit on the 2021 tax return. 

• The filing deadline for 2020 tax returns is May 17th.  IRA and Roth IRA contributions are also due that day.  The first tax estimate for 2021 is still due April 15th.