The Internal Revenue Service has begun accepting tax returns as of Monday, January 24, so tax season 2021 is officially upon us. Still, we know that it’s not anyone’s favorite time of year. (Well, okay, maybe Uncle Sam doesn’t hate it.) But in the interest of making tax time a little easier, we want to give you a quick rundown of a few important changes for tax year 2021. These aren’t all of the changes, so be sure to check with your tax professional for specific advice. For more about tax year 2021, visit IRS.gov.

Advance Child Tax Credit

You may know that there were some changes to the Child Tax Credit that impacted many taxpayers, in the form of Advance Child Tax Credit payments. If you received those payments, you’ll have a bit of extra reconciling to do when you file this year, and everyone who received payments must file a return. According to the IRS, “If you received advance payments of the Child Tax Credit (CTC), you need to reconcile the total you received with the amount you’re eligible to claim. To help taxpayers reconcile and receive 2021 CTC, the IRS is sending Letter 6419, Advance Child Tax Credit Reconciliation, from late December 2021 through January 2022. Taxpayers should keep this, and any other IRS letters about advance CTC payments, with their tax records.” Did you get a Letter 6419 in the mail? You’ll need that information when you file. Learn more about reconciling the Advance Child Tax Credit.

Recovery Rebate Credit

If you didn’t qualify for the third economic impact payment or didn’t receive the full amount, you could potentially be eligible for the Recovery Rebate Credit based on your 2021 tax information. To claim the credit, you’ll need to file a 2021 tax return, even if you don’t usually file. Find out if you’re eligible for the Recovery Rebate Credit.

Saver’s Tax Credit

We’ve always said that it pays to save! Also known as the Retirement Savings Contributions Credit, the Saver’s Tax Credit applies to eligible contributions to an IRA or employer-sponsored retirement plan. The amount of the credit varies depending on your adjusted gross income (AGI), but you may qualify for a credit up to $1,000 ($2,000 if married filing jointly). Learn more about the Saver’s Tax Credit.

Tax season 2021 standard deduction

What is a deduction? It’s an expense that can be subtracted from your taxable income to reduce the amount you owe. Each year, the IRS tends to raise the standard deduction amount to align better with inflation, and this year is no exception. The new standard deduction set by the IRS for 2021 is:

• $12,550 for single filers
• $12,550 for married couples filing separately
• $18,800 for heads of households
• $25,100 for married couples filing jointly¹

IRS Free File

Did you know that many people can qualify for free federal tax filing through the IRS Free File program? This year, the adjusted gross income (AGI) threshold to use IRS Free File has been raised to $73,000. Is that you? Consider your free filing options at IRS Free File.

¹ Internal Revenue Service. Revenue Procedure 2020-45, page 13. Accessed January 28, 2022.

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