Tax season is here and it's time to start thinking about the changes that have been made to the tax laws for 2021. With the Inflation Reduction Act, the Clean Vehicle Credit, and other changes, it's important to stay up to date on the latest tax news. The most significant change for 2021 is the increase in the amount of money that taxpayers can deduct for charitable contributions. Previously, taxpayers could only deduct between 20 and 60% of their adjusted gross income (AGI) depending on the type of contribution and the type of charitable organization. Now, taxpayers can deduct up to 100% of their AGI in qualified charitable contributions.
If you are over 72 years old, you should also be aware that you are required to start withdrawing money annually from tax-advantaged retirement accounts such as traditional IRAs and 401(k) IRAs. If you are looking to refinance your home, now is a great time to do so as the national average for 30-year fixed-rate refinancing is currently around 3.2%. This could save you hundreds of dollars in your monthly mortgage payments. It is also important to be aware of other tax deadlines such as October 17th which is the deadline to file an extended tax return.
On this date, Jeremy Hunt will also be announcing a new inheritance tax raid as he fights to balance the accounts in next week's Fall Statement. The electric vehicle tax credit was also revised by the Inflation Reduction Act (including a name change to the Clean Vehicle Credit). Depending on your income, your tax status and the number of children, this credit could save you anywhere from a few hundred to a few thousand dollars in taxes. If you had large medical bills last year, you may be able to find some tax relief as well.
The law allows you to deduct up to 100% of your adjusted gross income (AGI) on qualified charitable donations if you plan to itemize your deductions. Finally, transgender voters may face challenges voting on Tuesday due to strict voter identification laws in some states. It is also important to note that those who haven't filed their return (or haven't paid any taxes due) face severe penalties before the tax filing deadline. The Earned Income Tax Credit (EITC) is also a refundable tax credit that helps low- and moderate-income families. If you don't withdraw an adequate amount on time, Uncle Sam criticizes you with a 50% special tax on the money you're supposed to take. It is important to stay up-to-date with all of these changes so that you can make sure that you are taking advantage of all available deductions and credits when filing your taxes this year.