For the 1040 form you'll complete this year, married couples filing a joint return can claim a $25,100 standard deduction. Fortunately, the standard deduction amounts you'll use on your 2021 tax return are larger than last year, thanks to the annual adjustment for inflation. The extra length is due to various additions to income, "above-the-line" deductions, extra taxes, and less common credits now getting their own line on these forms instead of being lump together as an "other" item to include.Īpproximately 90% of all taxpayers claim the standard deduction instead of itemized deductions. Now, for 2021 tax returns, they're each two pages long. For 2020 returns, each of these schedules fit on one page. We see this in the expansion of Schedules 1, 2, and 3 that go with the 1040 form. The idea of having a postcard-size tax form has been totally abandoned, too. ( See more about changes to the child tax credit and earned income credit below.) Line 27 was also modified and expanded (including a new check box) to satisfy changes to the earned income tax credit. Lines 19 and 28 on page 2 of the 1040 form were also adjusted to account for the fact that the child tax credit is fully refundable for the 2021 tax year. It's also used by many states as the starting point for determining your state income tax liability. This is important because your federal AGI is used to calculate several other tax breaks and obligations. For instance, the line on page 1 of the 1040 used for reporting the $300 deduction for charitable cash contributions was moved down on the form so that the deduction no longer impacts your federal adjusted gross income (AGI). Generally, they're needed to account for changes to the tax laws that are discussed below. There are some subtle, but important, changes to the 1040 form itself for 2021 tax returns. So take a look at our list below and study up now so you know what to look for before tackling your 1040. But since " Tax Day" is right around the corner, you don't have much time left to get up-to-speed on what's new and changed for your 2021 tax return. If someone else prepares your 1040, it will be easier to catch any errors when you review the return. You're also likely to get through your return faster if you're already aware of any new twists and turns. First and foremost, it very well may result in a larger tax refund or a smaller tax bill. There are many reasons why you should know and understanding these changes up front. And, of course, there are the normal inflation-based adjustments that occur every year. There are a few modifications to some of the main 1040 schedules, too. Other changes stem from the expiration of earlier Covid-related provisions that expired at the end of 2020. This Covid-relief bill made changes to the child tax credit, child and dependent care credit, earned income tax credit, and more. Many (but not all) of the new items on the 2021 1040 form come from the American Rescue Plan Act, which was enacted last March.
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