Tax Tip Tuesday: Tax Season Arrives!

By Jeffrey R. Wolfe, Senior Vice President and Manager, Wealth Planning Strategies

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While we continue to hope that COVID doesn’t become one of the “guarantees in life,” another lifetime guarantee – taxes – are in season. The good news is that while tax season is upon us, the tax rules have remained consistent again this year.

With indexing, the 2021 tax year standard deductions are $12,550 for single filers and $25,100 for married filing joint filers. The state and local tax deductions remain limited to $10,000 regardless of filing status, meaning most taxpayers will not itemize their tax returns. However, even if you do not itemize, you may take a charitable deduction this year. Specifically, standard deduction filers may take an “above the line” deduction of $300 per individual ($600 per married couple) for contributions to public charities. This means you deduct this amount before calculating your AGI, making it an impactful deduction.

While tax laws haven’t changed, debate on change continues in Washington, D.C. It’s important to remember that any new laws should not affect your 2021 tax return. That said, it is possible that if changes to the tax laws occur in 2022, they could be applicable to actions as early as January 1, 2022.  In other words, it’s possible the rules could change mid-course. Accordingly, our series of tax tip blogs will touch on possible proposals or rhetoric this year with the caveat that our crystal ball is broken, and we have no idea what the future may bring.

Look for new topics every Tuesday until tax season ends, and remember your financial advisor is happy to work with you and your tax advisor to make filing your taxes as painless as possible. Happy Tax Season!

 

Benjamin F. Edwards does not provide tax advice; therefore, it is also important to consult with your tax professional for additional guidance tailored to your specific situation.