2021 Tax Law Changes: 6 Overlooked Tax Deductions for 2020 You Don’t Want to Miss by 30Seconds Mom
Following a year full of tax law changes, the Illinois CPA Society highlights there could be hidden savings awaiting all types of taxpayers this tax season. Below are some of the new, and easily overlooked, tax credits and deductions available.
- Did you get a stimulus payment? During spring 2020, the Treasury distributed stimulus payments of up to $1,200 (single filers) or $2,400 (married filing jointly), plus $500 for each qualifying child, to eligible taxpayers based on prior year tax return information. In early 2021, a second round of stimulus payments were sent of up to $600 (single filers) or $1,200 (married filing jointly), plus $600 for each qualifying child. However, if you didn’t receive stimulus payments because of your reported 2018 or 2019 income, but are now eligible based on your 2020 income, you can claim the Recovery Rebate Credit on your 2020 tax return. And if you happened to receive reduced stimulus payments based on your 2018 or 2019 income, but are now eligible for the full amount based on your 2020 income, you can claim the remaining credit on your 2020 tax return. Individuals who received the full amounts of both stimulus payments do not need to complete any information about the Recovery Rebate Credit on their 2020 tax returns.
- Did you donate to charity? Thanks to a CARES Act provision, even if you don’t itemize deductions on your tax return, your charitable cash donations of up to $300 to qualified charities made before December 31, 2020, could earn you a matching tax deduction of up to $300. This deduction has also been extended, and increased to $600 for married couples filing jointly, for the 2021 tax year.
- Did you take care of loved ones? If you support a parent, grandparent or another loved one, they may qualify as a non-child dependent, making you eligible for the new Other Dependent Credit, which allows you to reduce your tax burden by up to $500. This credit begins to phase out for individuals with income over $200,000 and married couples filing jointly with income over $400,000.
- Did you adopt a child? Taxpayers can receive a tax credit for qualifying adoption expenses up to $14,300 in 2020. The Adoption Credit is available for each child adopted, whether via public foster care, domestic private adoption, or international adoption. The credit is not available for adoptions of stepchildren, and the credit begins to phase out for families with modified adjust gross incomes of more than $214,520 and phases out entirely at $254,520.
- Did you pay student loans? The Student Loan Interest Deduction allows eligible taxpayers to deduct up to $2,500 in interest paid on student loans during 2020. The interest payments must be on student loans taken out to fund qualified higher education expenses for yourself, your dependents or spouse. This deduction is limited to taxpayers with modified adjusted gross income below $85,000 if filing single or $170,000 if married filing jointly.
- Did you take a class? The Lifetime Learning Credit can help pay for undergraduate, graduate and professional degree courses – including courses to acquire or improve job skills. Eligible taxpayers could receive up to a $2,000 tax credit for qualified expenses in 2020. The amount of this credit is gradually reduced for taxpayers earning between $58,000 and $68,000 ($116,000 and $136,000 if married filing jointly) and is phased out for taxpayers earning $68,000 or more ($136,000 if married filing jointly).
There’s a lot for taxpayers to take advantage of this filing season to ease their tax burdens and boost their tax refunds. The Illinois CPA Society reminds taxpayers that while everyone’s tax situation is different, a certified public accountant (CPA) is strategically positioned to help determine the best ways to maximize tax deductions and tax refunds.
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