The Internal Revenue Service (IRS) recently announced changes to the tax deductions available for the 2021 tax year. These changes are designed to help taxpayers save money and reduce their tax burden.
The most significant change is the elimination of the itemized deduction for state and local taxes. This deduction allowed taxpayers to deduct the amount of state and local taxes they paid from their federal taxable income. This deduction was especially beneficial for taxpayers in high-tax states like New York and California.
The IRS also announced changes to the standard deduction. The standard deduction is the amount of income that is not subject to taxation. For 2021, the standard deduction has been increased to $12,550 for single filers and $25,100 for married couples filing jointly. This is an increase of $200 and $400, respectively, from the 2020 tax year.
In addition, the IRS has increased the amount of the child tax credit. The credit is now worth up to $3,000 per child, up from $2,000 in 2020. This credit is available to taxpayers with children under the age of 17.
Finally, the IRS has also increased the amount of the earned income tax credit. This credit is available to low-income taxpayers and is now worth up to $6,660 for taxpayers with three or more qualifying children.
These changes to the tax code are designed to help taxpayers save money and reduce their tax burden. It is important to note, however, that these changes are only applicable to the 2021 tax year. Taxpayers should consult with a tax professional to determine how these changes may affect their individual tax situation.