The Internal Revenue Service (IRS) has announced changes to standard deductions for 2021. It’s important to understand these changes as they could have an impact on your taxes.
The standard deduction is a fixed amount of money that is subtracted from your adjusted gross income (AGI) to determine your taxable income. For the tax year 2021, the standard deduction has increased slightly due to inflation.
For taxpayers who file as single, the standard deduction for 2021 will be $12,550, which is an increase of $150 from the 2020 tax year. For married couples filing jointly, the standard deduction will be $25,100, an increase of $300 from 2020. Heads of households will have a standard deduction of $18,800, an increase of $150 from 2020.
The standard deduction for those who are over the age of 65 or blind has also increased. For singles and heads of households, the additional standard deduction will be $1,350, while for married couples filing jointly, it will be $2,700.
It’s important to note that some taxpayers may benefit more from itemizing their deductions rather than taking the standard deduction. Itemizing deductions allows taxpayers to deduct certain expenses, such as mortgage interest, state and local taxes, and charitable donations. If these expenses add up to more than the standard deduction, it may be more beneficial to itemize.
One significant change to note is the suspension of the personal exemption. In previous years, taxpayers were able to claim a personal exemption of $4,050 for themselves and each of their dependents. However, for tax year 2021, there will be no personal exemption.
Overall, the changes to the standard deduction may not have a significant impact on many taxpayers. However, it’s important to stay informed and aware of any changes to tax laws to ensure you optimize your deductions and reduce your tax liability.
If you’re uncertain about how the standard deduction changes may impact your taxes, it may be helpful to consult a tax professional or use tax software to help you navigate the process. The IRS website also provides helpful resources and information to assist taxpayers. Understanding the standard deduction changes for 2021 can ensure that you are preparing and filing your taxes accurately and effectively.
