Some of the Most Significant Tax Law Changes for 2021 to Know Before Your File

As the year is coming to a close, it means that we’re all that much closer to tax preparation and filing time. Don’t you love to hear that?! At Cove Professional Services, we’re always staying on top of the most critical tax law changes to ensure our clients are always in the know.

Here are a few of the most important upcoming tax law changes to know before you file your taxes:

ADJUSTMENTS FOR INFLATION

Income taxes are impacted by inflation in our economy, which means that the 2021 income tax brackets and your eligibility for certain deductions and credits and your standard deduction will adjust to reflect the inflation rates in the U.S.

DEDUCTIONS AND CREDITS ARE PHASING OUT.

The new tax laws have outlined certain deductions and credits that will start phasing out this tax year. These include:

EARNED INCOME TAX CREDIT:

The maximum income if you’re filing jointly as a married couple and claiming three or more dependents is $6,728, and the credit completely phased out if your Adjusted Gross Income is more than $57,414.

ALTERNATIVE MINIMUM TAX:

This will have higher exemptions and income phaseouts this year, with the exemption amount changing to $73,600 with phase-out beginning at $523,600 if you’re filing as single.

For more information on the tax law changes this year, be sure to reach out to one of our tax pros today and stay tuned for more Cove Professional updates coming to you soon!