Helpful miscellaneous articles
regarding our retirement plan and planning.
Like you, I review my retirement nestegg and plan from time to
time. Recently, I went though some
continued education for some credentials I maintain and it occurred to me that
we all could use a review about these issues.
So with your help, we will share and post articles and info that may be
helpful and of interest to many of you in this section.
Filing your
2021 taxes:
What to
remember
“It’s important to review your
tax situation every year,” says Tyler De Haan, director of business development
retirement solutions for Principal®. “As life changes, so could your taxes.”
That’s especially true during
times of significant legislative change, as we're experiencing amid the
pandemic. So work ahead, review these changes to tax legislation, and learn how
you may be able to save on your 2021 taxes.1
Deadline for filing 2021 taxes:
April 18, 2022
Deadline to contribute to your IRA for tax
year 2021:
April 15, 2022
It’s important to review your tax situation
every year. As life changes, so could your taxes.”
Tyler De
Haan, director of business development
retirement solutions
Find your 2021 federal tax bracket
Know where you fall in the 2021
federal tax bracket, especially if you’ve had a drastic change in salary in the
last year.
|
Income Tax Rates2 |
Single |
Married Filing
Jointly |
|
10% |
$0 to $9,950 |
$0 to $19,900 |
|
12% |
$9,951-$40,525 |
$19,901- $81,050 |
|
22% |
$40,526 to $86,375 |
$81,051 to $172,750 |
|
24% |
$86,376 to $164,925 |
$172,751 to $329,850 |
|
32% |
$164,926 to $209,425 |
$329,851 to $418,850 |
|
35% |
$209,426 to $523,600 |
$418,851 to $628,300 |
|
37% |
$523,600+ |
$628,300+2 |
For additional tips as you
prepare to file, watch the replay of our 2021 tax season webinar.
2021 tax deductions and tax legislation updates
Tax legislation is a lot to
keep up with. Read on for an overview of what’s new, what’s changed, and what
you can do to save on your 2021 taxes. You may want to consult a CPA or tax
professional for personalized advice.
1. Child tax
credits (CTC)
The big news this past year:
The child tax credit increased to $3,600 ($300 monthly) per child under age 6
and $3,000 ($250 monthly) per child under 18 at the end of 2021.3
Monthly advance cash payments were
issued beginning in July 2021 for those who chose to receive them; the rest of
the credit will be applied when you file your taxes.
Keep in mind that the CTC is
based on your income. You can claim the full credit if your adjusted gross
income is less than $75,000 for single parents and $150,000 for married
couples. For higher earners, credits are adjusted accordingly.
Planning ahead for next year’s taxes? Get our 2022 tax guide (PDF).
This credit is fully
refundable, so if you owe taxes this year, the credit may reduce your balance,
otherwise it may come in the form of a refund check. (On the flip side, if you
received more than you’re entitled to, you may have to pay it back.)
Get all the details on CTC eligibility and calculate the amount available to you.
2. Recovery
rebate credits
The third round of stimulus
checks from the American Rescue Plan Act, issued in March 2021, will also
affect some people’s taxes this year. These checks aren’t taxable. But if you
didn’t receive yours, you received less than the full amount, or you’ve since
become eligible due to a change in income—there will be an opportunity to
collect on your tax return.
3. Standard
2021 tax deductions
These amounts have increased
for inflation to $12,550 for single filers, $18,800 for head-of-household
filers, and $25,100 for married couples filing jointly.
Learn more about credits and deductions for individuals.
4. Changes
in this year’s tax withholdings
The IRS recommends checking your tax withholding every
year or when a big life event happens. If you got a second job, changed jobs,
or your spouse changed jobs this year, you may want to reevaluate your
withholdings, which can impact your tax refund or taxes due. And after you’ve
reviewed your withholding, it may help to reevaluate your retirement
contributions.
Curious about the long-term benefit of putting a little extra
toward your retirement savings? Use our Retirement Wellness Planner to assess your savings. A simple adjustment helps you see the potential of
contributing just 1% more from your paycheck.
5.
Elimination of personal exemptions
This exemption was eliminated
in the 2017 tax reform bill in favor of increasing the standard deduction. (See
No. 3 above.)
6. State and
local tax deduction limitations
Assuming you itemize deductions,
you can take a $10,000 maximum deduction—$5,000 if married filing separately
(MFS)—on any combination of state and local income, real estate, and personal
property taxes. Alternatively, you may elect to substitute state and local
sales taxes for income taxes, but you can’t use both.4
If passed, President Joe
Biden’s social spending bill may increase this limitation significantly.
7. Mortgage
interest deduction limit
The 2017 tax bill set a cap on
the total amount of mortgage debt for which you can deduct mortgage interest
paid: up to $750,000 ($375,000 if MFS) if you take out a new loan for a first
or second home between December 15, 2017, and December 31, 2025. If the tax act
isn’t extended, the cap will revert to total mortgage debt of $1,000,000 ($500,000
if MFS).
If you already have a mortgage,
your debt is grandfathered, and you can refinance without losing the $1,000,000
cap, if you don’t increase the debt by refinancing. However, if you have a
grandfathered mortgage and acquire a second home, the new cap will apply to
limit the second home mortgage to the $750,000, less the grandfathered mortgage
up to $750,000.
New mortgage interest deduction cap:
Grandfathered mortgage + second home and/or purchase of a new home = $750,000
8. Exclusion
for sale of your primary home
If you decide to sell your
primary residence, and you’ve lived there for two of the last five years,
single filers can still exclude up to $250,000 (married couples up to $500,000)
from capital gains taxes—a tax levied on profits you make when you sell for a
price higher than what you originally paid, plus the cost of upgrades other
than simple maintenance and repairs.5
9.
Alternative minimum tax (AMT)
For tax year 2021, AMT
increased to $73,600 for single or head of household (beginning to phase out at
$523,600), and $114,600 for married filing jointly or widow(er) (beginning to
phase out at $1,047,200).2
10. Estate
tax exemption
In 2021, the amount of money
exempt from the estate tax increased to $11.7 million.6
Since only 0.2% of all estates
are large enough to be hit by estate taxes, this only applies to a small number
of people.
(As with any of these informative articles,
anyone who needs someone to talk to about
this
very subject contact me and I can direct you to a knowledgeable advisor).
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