Yes, Congress waited until 27 December to change the tax laws. That’s exactly why we can’t file personal taxes until the Chinese New Year (or Lincoln’s Birthday) this year.
Note- we want to file your taxes before the ides of March, so you should be preparing your documents so we can do so. Although there’s a 25% chance the filing deadline will change this year, we’re not banking on it.
We expect to be swamped from 15 March to 15 April (not including the days we are closed for the Jewish holiday of Passover)- so please get your stuff to us sooner than later.
(If you don’t use our services [Shame on you!], you may not realize that we also increase our personal tax fees for all taxes prepared after the 14th of March where the data was not already fully in our possession, right? Along those same lines, the rules also apply for pass-through entities as of 20 February.)
Most of the tax changes have been reported here (just click the tax section [above, below the masthead] to see all those posts). Things like the special allowance for charitable tax deductions, the permanently changed medical floor threshold, FSA rollovers, the option of using either one’s 2019 or 2020 income for EIC/CTC computations, as well as the rulse for teacher’s allowances.
Today, I will discuss the change in tuition deductions. No, not for 2020 (which are being filed this year), but for 2021 (to be filed next year).
Tuition and fees will no longer directly deductible if incurred after 31 December 2020. Instead of the income deduction, we now have an expanded Lifetime Learning Credit.
| Lifetime Learning Credit | CY 2020 Limits | Expanded 2021 Limits |
| ————————————- | ——————— | —————————- |
| Single Filers | $59K to $ 69K | $80K to $90K |
| Joint Filers | $118K to $ 138K | $160K to $ 180K |
So, now- beginning with 2021 income- our tuition becomes a credit against taxes owed, instead of lowering our taxable income. That $ 4000 deduction afforded under the old rules could never have exceed $ 1480 in tax (and that was only if you were in the 37% bracket-which if our income is limited to $ 69K, we are nowhere close to that bracket). So, you should be pleased- if your income is below these income levels- that this new benefit lowers your taxes way more than that!
That’s something to look forward to when filing your taxes next year.
Taxes.. I shudder to files ours this year and wonder what will happen. Stimulus Checks, a job and Unemployment joy be.. As least we survived.
We’ll see if there will be unemployment benefits or additional stimulus, Ms. Cates.
Just read your post to my son. Despite the fact that I think of both of us as very intelligent people, we didn’t quite get it. But it does sound like good news!
Sorry, Jeanine. The article passed the FOG index, too- which for me, is somewhat unusual.
Hope this benefit helps many!
Martha recently posted..365 Day Photo Challenge from January
Anyone who is paying college tuition, Martha!
I can imagine that this particular tax year will be more confusing than usual – this info will be very helpful to many. A good post.
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I hope you are wrong- that this will be confusing. Of course, it could mean a banner year for us, though!
I have an EA prepare our taxes although they aren’t complex. He has helped us in many ways (when my mil passed away, he did her final tax return and he found she had never handled taxes for his disabled brother – we never would have known) and I second you – everyone needs a good tax professional. The system is just too confusing for many laypeople. Let the experts help!
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Of course, you know I would agree with that. Except those that simply have W2 income and rent their abodes should do their taxes themselves.