The Internal Revenue Service (IRS) has recently announced several significant changes to the tax code that could have a major impact on taxpayers. The changes are meant to simplify the tax filing process and to ensure that taxpayers are receiving the correct amount of tax breaks and credits.
One of the most notable changes is the increase in standard deduction amounts. For the tax year 2021, the standard deduction for single taxpayers and married individuals filing separately has been increased to $12,550, up from $12,400 in 2020. For married couples filing jointly, the standard deduction has been raised to $25,100 from $24,800. These increases are intended to make it easier for taxpayers to take advantage of the standard deduction without having to itemize their deductions.
Another significant change is the expansion of the Child Tax Credit. The credit has been increased to $3,000 per child for children ages 6 to 17, and $3,600 per child for children under 6. This change is expected to provide much-needed relief to families with children and could potentially lift millions of children out of poverty.
In addition to these changes, the IRS has also made adjustments to the Earned Income Tax Credit (EITC) and the Dependent Care Assistance Program. The EITC is a refundable tax credit for low-to-moderate-income working individuals and couples, particularly those with children. The IRS has increased the maximum amount of the credit and the income limits for the tax year 2021, providing more financial support to eligible taxpayers.
Furthermore, the Dependent Care Assistance Program has been modified to allow for an increase in the maximum amount of excludable qualified dependent care benefits from $5,000 to $10,500 for the tax year 2021. This change aims to alleviate the financial burden on families that rely on dependent care assistance to afford childcare and other related expenses.
It’s important for taxpayers to stay informed about these changes and how they may affect their tax liability. By taking advantage of the updated tax breaks and credits, taxpayers can potentially lower their tax bill and receive a larger tax refund. It’s also worth noting that these changes may have an impact on state tax returns, so it’s essential for taxpayers to review their state tax laws as well.
As the tax filing season approaches, taxpayers should keep these changes in mind and consult with a tax professional to ensure that they are maximizing their tax benefits. By staying informed and taking advantage of the latest tax code changes, taxpayers can make the most of their tax return and avoid any potential penalties from the IRS.
Uncover the IRS’s Latest Tax Code Changes
