The year 2020 is almost winding up, and many people will never forget the year and its effect. I am sure the entire human race will do anything not to have a year like 2020 nor have anything to do with it again.
However, we all need to take care of the 2020 tax year before bidding the year farewell for good.
Thanks to the Covid-19 pandemic as well, there will be many changes for the 2021 tax year. As a result, people must start taking care of their taxes now while there is still time. Before then, it is necessary to understand the changes and how they affect you.
First, here are some essential changes one need to know about filing tax in 2021:
The deadline for tax is Thursday, April 15, 2021. All your 2020 tax return must be in by then
Single filers have their standard deduction shot up from $12,400 while married filing jointly have it at $24,800
To account for inflation, there was an increase in the income tax bracket.
This, however, does not explain the fundamental changes citizens should expect next year. We will break down the changes that will likely affect.
Income Bracket and Rate for the 2021 Tax Filing Season
Users need to understand what the tax rate and tax bracket are and how it affects their taxes. The tax rate refers to the particular percentage of one's income that one will pay as tax. The tax bracket as well refers to the income range that someone falls in, based on the payment.
For example, a single individual with a total income of $200,000 will be in the 24% tax bracket. This, however, does not mean that the person has a flat tax rate of 24%. However, a part of your income will be taxed at 10% and another part at 14%, and the last part at 24%. There is a table below that shows various tax brackets and their tax rate.
While the tax rate for 2020 is the same, there are some simple adjustments to the tax brackets. The adjustment is to take care of inflation.
Data Source: IRS
Higher Standard Deductions in 2020
In paying taxes, taxpayers have two options – to go by the standard deduction approach or itemize their deductions. For people that will itemize, you need to estimate the deduction one by one. While itemizing seems like much work, it is a good idea, provided your itemization is above your standard deduction amount.
For the tax year 2020, the standard deduction rose a bit to take care of inflation.
Bear in mind that the tax situation is never the same for taking the standard deduction or itemized. Your best bet is to discuss with a tax professional to know what works best for you.
FOR MORE INFORMATION ON HOW WE CAN HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CONTACT Accurate Books & Tax BY CLICKING THE BLUE TAB ON THIS PAGE.
THANKS FOR VISITING.
