Tax Changes for 2020-2021: Coronavirus Effects and Other New Rules

Here's how some of the most influential tax rules have changed and how they might affect you.
Tina OremApr 12, 2021
Never Mind Tax Reform — What's Different When I File This Year?

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This article covers two types of tax changes this year:

  • Tax changes related to the government's ongoing response to the coronavirus.

  • Tax changes related to annual adjustments in tax rules and thresholds that could affect what you can claim and how you file.

Coronavirus-related tax changes

The tax-filing deadline this year is May 17, 2021 (it's usually on or around April 15). If you get an extension, you'll have until October 15, 2021, but remember that a tax extension only gets you more time to file, not more time to pay. Read more here.

The U.S. Treasury has announced a third round of economic impact payments. Not everyone qualifies, and when you'll get money depends on a few factors. Learn more here.

The IRS temporarily suspended issuing new automatic, systemic liens and levies, but that expired on July 15, 2020. For more, see our page about tax liens and our page about tax levies.

The IRS temporarily allowed people with installment agreements to skip payments, but that expired on July 15, 2020. Learn more.

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.

This year's regularly scheduled changes

Tax brackets and tax rates

There are seven federal tax brackets 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.

2020 federal income tax brackets

(for taxes due in May 2021, or in October 2021 with an extension)

Expand the filing status that applies to you.

Tax rate

Taxable income bracket

Tax owed

10%

$0 to $9,875

10% of taxable income

12%

$9,876 to $40,125

$987.50 plus 12% of the amount over $9,875

22%

$40,126 to $85,525

$4,617.50 plus 22% of the amount over $40,125

24%

$85,526 to $163,300

$14,605.50 plus 24% of the amount over $85,525

32%

$163,301 to $207,350

$33,271.50 plus 32% of the amount over $163,300

35%

$207,351 to $518,400

$47,367.50 plus 35% of the amount over $207,350

37%

$518,401 or more

$156,235 plus 37% of the amount over $518,400

Tax rate

Taxable income bracket

Tax owed

10%

$0 to $19,750

10% of taxable income

12%

$19,751 to $80,250

$1,975 plus 12% of the amount over $19,750

22%

$80,251 to $171,050

$9,235 plus 22% of the amount over $80,250

24%

$171,051 to $326,600

$29,211 plus 24% of the amount over $171,050

32%

$326,601 to $414,700

$66,543 plus 32% of the amount over $326,600

35%

$414,701 to $622,050

$94,735 plus 35% of the amount over $414,700

37%

$622,051 or more

$167,307.50 plus 37% of the amount over $622,050

Tax rate

Taxable income bracket

Tax owed

10%

$0 to $9,875

10% of taxable income

12%

$9,876 to $40,125

$987.50 plus 12% of the amount over $9,875

22%

$40,126 to $85,525

$4,617.50 plus 22% of the amount over $40,125

24%

$85,526 to $163,300

$14,605.50 plus 24% of the amount over $85,525

32%

$163,301 to $207,350

$33,271.50 plus 32% of the amount over $163,300

35%

$207,351 to $311,025

$47,367.50 plus 35% of the amount over $207,350

37%

$311,026 or more

$83,653.75 plus 37% of the amount over $311,025

Tax rate

Taxable income bracket

Tax owed

10%

$0 to $14,100

10% of taxable income

12%

$14,101 to $53,700

$1,410 plus 12% of the amount over $14,100

22%

$53,701 to $85,500

$6,162 plus 22% of the amount over $53,700

24%

$85,501 to $163,300

$13,158 plus 24% of the amount over $85,500

32%

$163,301 to $207,350

$31,830 plus 32% of the amount over $163,300

35%

$207,351 to $518,400

$45,926 plus 35% of the amount over $207,350

37%

$518,401 or more

$154,793.50 plus 37% of the amount over $518,400

Standard deduction

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. (Go here for help deciding whether to itemize or take the standard deduction.)

Filing status

2020 tax year

2021 tax year

Single

$12,400

$12,550

Married, filing jointly

$24,800

$25,100

Married, filing separately

$12,400

$12,550

Head of household

$18,650

$18,800

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.

Personal exemption

There are no personal exemptions in the 2020 tax year.

Retirement plan contribution and income limits

Contributing to an IRA can cut your tax bill significantly.

Traditional IRA income limits for the 2020 and 2021 tax years

Note: Traditional IRA income limits apply only if you (or your spouse) have a retirement account at work.

Filing status

2020 MAGI

2021 MAGI

Deduction

Single or head of household (and covered by retirement plan at work)

$65,000 or less

$66,000 or less

Full deduction

More than $65,000 but less than $75,000

More than $66,000 but less than $76,000

Partial deduction

$75,000 or more

$76,000 or more

No deduction

Married filing jointly (and covered by retirement plan at work)

$104,000 or less

$105,000 or less

Full deduction

More than $104,000 but less than $124,000

More than $105,000 but less than $125,000

Partial deduction

$124,000 or more

$125,000 or more

No deduction

Married filing jointly (spouse covered by retirement plan at work)

$196,000 or less

$198,000 or less

Full deduction

More than $196,000 but less than $206,000

More than $198,000 but less than $208,000

Partial deduction

$206,000 or more

$208,000 or more

No deduction

Married filing separately (you or spouse covered by retirement plan at work)

Less than $10,000

Less than $10,000

Partial deduction

$10,000 or more

$10,000 or more

No deduction

Roth IRA income limits for the 2020 and 2021 tax years

Filing status

2020 MAGI

2021 MAGI

Maximum annual contribution

Single, head of household or married filing separately (if you didn't live with spouse during year)

Less than $124,000

Less than $125,000

$6,000 ($7,000 if 50 or older)

$124,000 up to $139,000

$125,000 up to $140,000

Contribution is reduced

$139,000 or more

$140,000 or more

No contribution allowed

Married filing jointly or qualifying widow(er)

Less than $196,000

Less than $198,000

$6,000 ($7,000 if 50 or older)

$196,000 up to $206,000

$198,000 up to $208,000

Contribution is reduced

$206,000 or more

$208,000 or more

No contribution allowed

Married filing separately (if you lived with spouse at any time during year)

Less than $10,000

Less than $10,000

Contribution is reduced

$10,000 or more

$10,000 or more

No contribution allowed

Student loan interest deduction

The student loan interest deduction 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.

Earned Income Tax Credit

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 (go here for more on how it works).

2020 Earned Income Tax Credit

(for taxes due in May 2021)

Number of children

Maximum earned income tax credit

Max earnings, single or head of household filers

Max earnings, joint filers

0

$538

$15,820

$21,710

1

$3,584

$41,756

$47,646

2

$5,920

$47,440

$53,330

3 or more

$6,660

$50,954

$56,844

  • Both your earned income and your adjusted gross income each have to be below the levels in the table.

  • In general, the less you earn, the larger the earned income credit.

  • Your earned income usually includes job wages, salary, tips and other taxable pay you get from your employer. Your adjusted gross income is your earned income minus certain deductions.

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