The following is not a complete list of changes but highlights. For detailed information, guidance and Instructions, kindly refer to IRS Publication 17.
The last date to file your return is April 18th, 2022 due to Emancipation Day Holiday in the District of Columbia. For Residents of Maine or Massachusetts, the filing deadline is April 19th, 2022 due to Patriot's Day holiday in those states.
The amount of Income before you must file a return has been increased this year. Following are the Gross Income amounts and Age Limits to determine whether you must file a Tax Return.
Filing Status "Single" and under Age 65 - $12,550.00
Filing Status "Single" Age 65 or Older - $14,250.00
Filing Status "Married Filing Joint", under Age 65 both Spouses - $25,100.00
Filing Status "Married Filing Joint", Age 65 or older one spouse - $26,450.00
Filing Status "Married Filing Joint", Age 65 or older both spouses - $27,800.00
Filing Status "Married Filing Separately", Any Age - $5.00
Filing Status "Head of Household", Under Age 65 - $18,800.00
Filing Status "Head of Household", Age 65 or Older - $20,500.00
Qualifying Widow(er), under Age 65 - $25,100.00
Qualifying Widow(er), Age 65 or Older - $26,450.00
Tuition and Fees Deduction is not available this year, however the Income limits for lifetime learning credit have increased. The amount of the Lifetime Learning Credit is reduced "Phased out" if Modified Adjusted Gross Income is between $80,000.00 and $90,000.00 for Single Filers, Or $160,000.00 and $180,000.00 if you file a Joint Return. You cannot claim Lifetime Learning Credit if your Modified Adjusted Gross Income is above 90,000.00 if Filing Single or $180,000.00 if Filing Married Filing Joint Return. (Ref: Form 8863 Instructions)
The Economic Impact Payment received is not taxable for Federal Income Tax purposes, however it will reduce your recovery rebate credit.
The Recovery Rebate Credit is figured like last year's Economic Impact Payment except Eligibility and the amount of credit are based on your Tax Year 2021 information. (Ref: Recovery Rebate Credit 2021)
The Standard Deduction Amount for 2021 has been increased for all filers. Single or Married filing Separately, Standard Deduction amount is $12,550.00. Married filing jointly or Qualifying Widow(er) Standard Deduction amount is $25,100.00. Head of Household Standard Deduction amount is $18800.00. (Ref: IRS Pub 17)
The Additional question regarding Virtual Currency must be answered by everyone with a yes or no answer, even if you did not have any virtual currency transactions.
Certain Self Employed Individuals can claim credits up to 10 days of "paid sick leave" and up to 60 days of "paid family leave" if they are unable to work or telework due to circumstances related to Corona Virus. Self Employed individuals may claim these credits for the period beginning on April 1st, 2021and ending September 30th, 2021. (Reference, Instructions for form 7202)
Beginning in 2021, the Identity Protection Pin Opt-in program has been expanded to all tax payers who can properly verify their identity. The program prevents the filing of fraudulent tax returns using the taxpayers Social Security number. The (IP-PIN) can be obtained online on the IRS website - (Request IP PIN)
The Child and Dependent care credit has been increased for 2021. Also the Dependent Care Tax credit has been made a refundable Tax credit. The Dollar limit on qualified expenses has been increased to 8000.00 for one qualifying person and 16000.00 to two or more qualifying people. (Ref: Form 2441, and Pub 503)
The Child Tax Credit has been extended to qualifying children under 18. You may receive an enhanced credit amount of up to 3600.00 for qualifying child under age 6, and 3000.00 for qualifying child over age 6 and under age 18, depending upon your modified adjusted gross income. (Ref: Instructions for Schedule 8812 - Form 8812)
The minimum age to claim Earned Income Credit (EIC) without a qualifying child has been lowered to age 19, except for specified students who must be at least age 24 at the end of the year. Additionally, you no longer need to be under age 65 to claim the EIC without a qualifying child. The phaseout income limits and the amounts of EIC have been increased. For filers that are married and file a separate return, they can claim the EIC if the child lived with them for more than half the tax year, and either lived apart from their spouse for more than six months or are legally separated according to your state law, under a written separation agreement or a decree of separate maintenance and do not live in the same household as your spouse at the end of 2021. The amount of Investment Income has been increased up to 10,000.00 to be eligible to file EIC.
The forgiven amounts of Paycheck Protection Program (PPP) loans are considered Tax Exempt Income and do not need to be reported on 1040. However certain information regarding the PPP loans have to be reported and detailed instructions are available under (Instructions for 1040, Forgiveness of Paycheck Protection Program (PPP) Loans under Income section.)
An improved online system has been introduced by IRS to access secure information by tax payers and would be fully operational during 2022. The online portal would provide the Child Credit Update Portal, On-line Account, Get transcript online, Get an Identity Protection PIN (IP-PIN), and Online Payment Agreement. (Ref: IR-2021-228)
The Personal Protective Equipment (PPE), such as masks, hand sanitizers, sanitizing wipes, for the Primary purpose of preventing the spread of coronavirus, are qualified medical expenses. However if the amounts were paid or reimbursed under a health flexible spending account, Archer medical savings account, health reimbursement arrangement, or any other health plan, the amounts are not deductible on Schedule A (Form 1040)
The Standard Mileage Rate allowed for operating expenses for a car when you use it for medical reasons decreased to 16 cents a mile, for volunteer work for certain charitable organizations remains at 14 cents a mile and for business use of a vehicle is 56 cents a mile.
The Modified AGI limit for Roth and Traditional IRA Contributions have changed. Detailed instructions are available for contribution and AGI limits in Pub: 590-A.
The simplified worksheet for figuring your Qualified Business Income (QBI) deduction is now Form 8995, Qualified Business Income Deduction Simplified Computation. If you do not met the requirements to file form 8995, use Form 8995-A, Qualified Business Income Deduction.
The Alternative Minimum Tax (AMT) exemption amount increased to $73,600.00 for Single Filers, $114,600.00 if filing Married filing jointly or qualifying widow(er) and $57,300.00 if married filing separately. The Income limits at which the AMT exemption begins to phase out have increased to $523,600.00 for Single Tax payers, $1,047,200.00 if married filing jointly or qualifying widow(er).
The Adoption Credit and exclusion for employer provided adoption benefits have both increased to 14,440 per eligible child. The amount begins to phase out if you have modified AGI in excess of 216,660 and completely phases out if modified AGI is 256,660 or more.