ax season is upon us, and while it doesn’t look like it will have all the upheaval of the 2020 tax season, there are a few changes for your 2021 taxes. The IRS is reporting that income tax returns will be accepted starting on Jan. 31, with the caveat that it may end up being delayed for a week or so. There are three things to know before you file this year.
Income tax brackets have changed a bit.
The income ranges for tax brackets have changed slightly to account for inflation. For 2021, the following rates and income ranges apply:
If you qualified for the child tax credit, your refund may look different.
The American Rescue Plan that rolled out in 2020 will affect families’ tax returns in 2021. “We will see some slight tax increases for 2021 but the biggest changes are in the American Rescue Plan that increased child tax credits from $2,000 per child to $3,600 for under 5 and $3,000 for 6 to 17,” said Heath Crager, CPA with the firm Crager LaBorde CPA’s, LLC. “Most families are getting advances on the child tax credit. What this means is that some of the new credits will already have been taken in the form of advance refunds during 2021…Be prepared to receive a smaller refund in the upcoming tax year than the previous year.”
The estate tax exemption is higher.
The estate and gift tax exemption rises to 11.7 million for 2021, as it is indexed to inflation. The annual gift exclusion stays at $15,000 per recipient, which means you can give money to your loved ones up to this amount without incurring any tax liability or using up all your lifetime estate and gift tax exemption.