While April 15^th, 2021, might seem like a long way off, it will be here before you know it. That’s why it’s a good idea to begin tax preparation now to ensure you’re well aware of the many changes on the horizon. This guide highlights a few of the more prominent upcoming changes so you can rest assured that you’re ready for tax day. 

How Will Tax Preparation Change in 2021?

1. Higher Standard Deductions

The standard deduction is a simpler method of lowering your taxable income as compared to itemizing deductions, which can be pretty labor-intensive depending on your situation. Standard deductions increase from year to year due to inflation, meaning filers can expect higher amounts when doing taxes in 2021. Filers who are married filing jointly will be privy to a $24,800 standard deduction, while single filers and those married filing separately will receive a standard deduction of $12,400. Additionally, the head of household amount will be $18,650.

2. Charitable Deductions Without Itemizing

While you’re allowed to deduct charitable contributions you made throughout the year from your taxes, you must itemize deductions to do so. This year, taxpayers are permitted to use the standard deduction while also deducting charitable contributions up to $300. This change was implemented as part of the CARES act as a means of encouraging people to donate to charity to help others in need. 

3. Waived Required Minimum Distributions (RMDs)

The CARES act has also affected how retirement accounts will be taxed in 2021. RMDs are yearly minimum amounts that a retiree must withdraw from a retirement account upon reaching the age of 72. These withdrawals are considered taxable income, so by waving them, retirees may pay less in taxes in 2021. This waiver includes both 401(k)s and IRAs. 

Even with the right guidance, tax preparation can be confusing, but working with a skilled CPA ensures you’re taking advantage of all the possible deductions and credits. In Saint Peters, MO, William G. Molitor, CPA, has assisted local taxpayers since 1990. Whether you have questions about filing your taxes this year or need help with financial planning for the future, these skilled tax professionals are poised and ready to assist you. Call (636) 926-0502 to schedule your free initial consultation.