Legacy Tax Services

Tax Credit, Income and Exclusion Limits Increasing for 2021 Did You Know? As a result of annual IRS cost-of-living adjustments, a number of federal tax credit amounts and income limits will increase in 2021. Here are some of the most significant changes affecting taxpayers at a variety of income levels. EARNED INCOME CREDIT (EIC) CHANGES. The maximum credit amounts for taxpayers with zero, one, two, or three or more children will all increase. For example, the maximum credi...t for a family with three or more children will be $6,728, up from $6,600 in 2020. The income limit to receive the maximum credit, along with the maximum income at which a taxpayer may receive an EIC in any amount, will also rise from 2020 levels. HIGHER EXCLUSION FOR ESTATE TRANSFERS. The lifetime exclusion for estate transfers and bequeathals will be $11,700,000 in 2021, up from $11,580,000 in 2020. However, the annual gift and transfer exclusion limit will remain at $15,000. INCREASED INCOME LIMIT FOR THE LIFETIME LEARNING CREDIT. For couples filing jointly who claim the Lifetime Learning Credit, the gross income level used to calculate a reduction in the credit will rise from $118,000 to $119,000. LARGER ADOPTION CREDIT. The maximum credit for adoption expenses will increase by $140 for 2021, up to $14,440. HIGHER FOREIGN INCOME EXCLUSION. The foreign earned income exclusion amount will be $108,700 in 2021, a $1,100 increase over the 2020 level of $107,600. A tax professional can help you determine whether these and other IRS adjustments could affect your 2021 taxes. If a significant change in your annual tax bill might occur, you may need to adjust your paycheck withholding amount and/or quarterly estimated tax payments.

2021 Mileage Rate Changes Starting on Jan. 1, 2021, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: - 56 cents per mile of business travel driven, a decrease of 1.5 cents from the rate for 2020.... - 16 cents per mile driven for medical or moving purposes (for qualified active duty members of the Armed Forces), a decrease of 1 cent from the rate for 2020. - 14 cents per mile driven in service of charitable organizations, remaining unchanged from 2020. You may also have the option of calculating the actual costs of using your vehicle rather than using the standard mileage rates.

Tax Filing Season Start - Did You Know? The IRS has announced that the individual tax filing season will start on Friday, February 12, 2021 and the current deadline to file 2020 tax returns and pay any taxes owed is Thursday, April 15, 2021. Although the IRS systems open for processing on February 12, you do not have to wait until then to begin preparing for your tax return.

Quarterly Estimated Tax Payments - Reminder If you are making quarterly estimated tax payments to the IRS, the due date for the September 1st - December 31st quarter of the year is January 15th. You may be able to skip the January 15 payment if you file your 2020 return by February 1, 2021 and pay all tax due. For payments made using IRS Direct Pay, you can make payments until 8PM EST, and for payments using a credit or debit card, payments can be made up to midnight on the due date.