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This article covers two types of tax changes this year:
Each year, the IRS also does some tinkering and adjusting to various tax rules, and knowing what they are could save you a lot of money. Here's what's different for the 2020 tax year, which will affect the tax return you'll file in 2021.
There are seven for the 2020 tax year: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Your bracket depends on your taxable income and filing status. These are the rates for taxes due in May 2021.
(for taxes due in May 2021, or in October 2021 with an )
Expand the filing status that applies to you.
The standard deduction reduces your taxable income. For the 2020 tax year (that's the tax return you'll file in 2021), the standard deduction is $12,550 for single filers and married filers filing separately, $25,100 for married filers filing jointly and $18,800 for heads of household. (.)
The standard deduction is $1,300 higher for those who are over 65 or blind; it's $1,650 higher if also unmarried and not a surviving spouse.
There are no personal exemptions in the 2020 tax year.
can cut your tax bill significantly.
Note: Traditional IRA income limits apply only if you (or your spouse) have a retirement account at work.
lets you deduct up to $2,500 from your taxable income if you paid interest on student loans in 2020. If you fall into the 22% tax bracket, for example, the maximum student loan interest deduction would put $550 back in your pocket.
Student loan interest is deductible if your modified adjusted gross income, or MAGI, was less than $70,000 in the past tax year. The maximum deduction is $2,500. If your MAGI was between $70,000 and $85,000, you can deduct a reduced amount of interest that you paid.
The Earned Income Tax Credit (EIC or EITC) is a refundable tax credit for low- and moderate-income workers. The amount depends on income and number of children. People without kids can qualify. For 2020, the earned income tax credit ranges from $538 to $6,660. The amount depends on income and number of children. People without kids can qualify. For 2021, the earned income credit ranges from $1,502 to $6,728 ().