Can you believe that we are closing in on the end of another year? You know what that means — it’s time to start preparing your 2021 taxes. Get a head start by reviewing the following changes and updates you can expect to see this year.
Retirement Plans
One big thing to note is that required minimum distributions (RMDs) are back for 2021. Last year, seniors were able to skip their RMDs without having to pay a penalty, but anyone who will be 72 years old by the end of 2021 will need to take an RMD.
In regards to Roth IRA plans, contributions go up in 2021 as follows:
- Adjusted gross income of $198,000 to $208,000 for couples
- Adjusted gross income of $68,000 to $76,000 for single filers
Charitable Gift Deduction
In 2020, a new deduction of up to $300 of charitable cash contributions was allowed for those who claimed standard deductions as opposed to itemized deductions on Schedule A. This will also be the case in 2021 with the exception that married couples can deduct up to $600.
Qualified Business Income Deduction
Self-employed people and owners of LLCs, S corporations and other pass-through entities can deduct 20% of their qualified business income (subject to limitations) — this deduction is available for joint filers with taxable income below $329,800 and individuals with taxable income below $164,900. Other changes that self-employed Americans need to know about include:
- The deduction for business meals is increased from 50% to 100% for 2021 and 2022;
- Self-employment taxes cannot be deferred in 2021 as they were in 2020; and
- The $250,000 cap on deductible business losses ($500,000 for joint filers) is back in play after being suspended for the 2018 to 2020 tax years.
We hope these insider tips will help make your end-of-the-year tax planning a little easier. If you are looking for more specific, in-depth advice, we can help. Contact us today to get started!