- Charitable Cash Donations: For 2021 only, there's an "above-the-line" deduction for up to $300 for cash donations to charity ($600 for those married and filing jointly). Donations to donor advised funds and certain organizations that support charities don't qualify for this tax break. If you itemize, donating clothes, kitchenware or furniture you no longer need can boost your deductions while helping a worthy cause. You'll base your deduction on the donated item's "fair market value" (or what it might sell for at a thrift or consignment shop) to estimate this value. You will need a written acknowledgment from the organization if you are claiming a contribution of $250 or more (consider snapping a photo of the donation for your records). For donated items valued at more than $5,000 (art, antiques, etc.), plan on providing a written appraisal.
- Taxpayers who are 70½ or older can transfer up to $100,000 from a traditional IRA tax-free to charity each year, as long as they transfer the money to the charity directly. This is a nice benefit for IRA owners who are 72 or older, because the distribution counts as your required minimum distribution. In addition, a "qualified charitable distribution" will reduce the size of your IRA, which will reduce future required withdrawals, and your tax bill too. Plus, the transfer could help keep your income below the threshold at which you're subject to the Medicare high-income surcharge as well as hold down the percentage of your Social Security benefits subject to tax.
- Medicare Part B: Be careful about making a large conversion if you're within two years of signing up for Medicare — you'll have to pay extra for Medicare Part B if your adjusted gross income (plus tax-exempt interest income) is more than a certain amount. Your last tax return on file determines your Medicare premiums, so a 2021 conversion could affect 2023 premiums.
- Adoption Credit: For 2021, the adoption credit can be taken on up to $14,440 of qualified expenses per child, any surplus credit can be carried forward for up to five years.
- Review your medical bills: If you have enough unreimbursed medical expenses, you may be able to deduct them. You can only deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income. That puts this tax break out of reach for most taxpayers, but if you had extraordinarily high medical expenses this year — due to a major illness, for example — you may qualify. There's still time to schedule appointments and procedures that will increase the amount of your deductible expenses. The list of eligible expenses includes dental and vision care, which may not be covered by your insurance. For the complete rundown, go to IRS Publication 502.
- Contribute to a 529 college savings plan: Stashing money in a 529 plan before year-end won't reduce your federal tax bill, but it could lower your state tax tab. More than 30 states allow you to deduct at least a portion of 529 plan contributions from state income taxes. In most states, you must contribute to your own state's plan to get the tax deduction, but several states allow you to deduct contributions to any state's plan. Check out your own state's rules at savingforcollege.com. Many states allow grandparents and others to contribute to your child's plan, and a few will allow them to deduct those contributions, too.
- Save for Retirement 401k & Roth 401K: As the year comes to a close, you may be able to squeeze a little more money from each paycheck for your retirement savings. You can contribute up to $19,500 to a 401(k), 403(b) or federal Thrift Savings Plan in 2021, plus $6,500 in catch-up contributions if you're 50 or older. Pretax contributions will lower your take-home pay and reduce your tax bill. If your employer offers a Roth 401(k), you can make contributions that won't lower your taxable income now but that can be withdrawn tax-free in retirement. If your employer offers both types of plans, you can direct new contributions to the Roth 401(k) rather than the pretax 401(k) at any time. Contact your 401(k) administrator or your employer's human resources department ASAP to find out how much you're on track to contribute to your 401(k) by the end of the year. If you're contributing on your own to a traditional or Roth IRA for 2021, you have until April 18, 2022.
- Required minimum distributions (RMDs) are back for 2021. Seniors were allowed to skip their RMDs in 2020 without having to pay a penalty. But the RMD suspension only applied for one year. So, anyone who is at least 72 years old by the end of the year is required to take an RMD for 2021.
- Short-term Capital Gains: The tax rate on short-term capital gains (i.e., from the sale of assets held for less than one year) is the same as the rate you pay on wages and other "ordinary" income. Those rates currently range from 10% to 37%, depending on your taxable income.
- Child Tax Credit: Big changes were made to the 2021 child tax credit by the American Rescue Plan Act, which President Biden signed into law in March. The two most significant changes impact the credit amount and how parents receive the credit. First, the new law temporarily increases the credit amount from $2,000-per-child to $3,000-per-child ($3,600 for children 5 years old and younger) for the 2021 tax year. Second, it authorizes advance payments to eligible families from July to December. Half the total credit amount will be paid in advance with the monthly payments this year, while the other half will be claimed on the tax return you'll file next year. (Although these changes currently apply only to the 2021 tax year, President Biden wants to extend them beyond this year.)
- ABLE Account: Look into an ABLE account. If someone in your family has special needs, you can contribute up to $15,000 this year to an ABLE account, which allows people with qualifying disabilities to save money without jeopardizing government benefits (ABLE account beneficiaries can contribute more to their own account). You don't have to invest in your own state's plan, but if you're a resident of one of the states that do offer a tax break for ABLE accounts, you can deduct your contribution. For more information, go to the ABLE National Resource Center's website.
Due Dates for 2022 Estimated Tax Payments
Payment |
Payment Due for Period of |
Due Dates |
1st Payment |
January 1-March 31 |
April 15, 2022 |
2nd Payment |
April 1-May 31 |
June 15, 2022 |
3rd Payment |
June 1-August 31 |
September 15, 2022 |
4th Payment |
September 1-December 31 |
January 16. 2023 |
- You don't have to make the payment due January 18, 2022, if you file your 2021 tax return by January 31, 2022, and pay the entire balance due with your return. Use Form 1040-ES to pay your estimated taxes. There are a number of ways to pay estimated taxes, including by check, cash, money order, credit card and debit card. There are many online payment options, too, such as the Electronic Federal Tax Payment System (EFTPS). The various payment methods are described in the instructions for Form 1040-ES. Finally, unless you live in a state with no income tax, you probably owe estimated tax payments to your state, too. Due dates for state payments may or may not coincide with the federal dates, so be sure to check with the appropriate tax agency in your state.
- Unemployment Compensation: The American Rescue Plan Act made up to $10,200 of unemployment compensation ($20,400 for married couples filing jointly) exempt from federal income tax for households with an adjusted gross income less than $150,000 (the IRS sent refunds to people who filed their return before the exemption was enacted). Unfortunately, the exemption only applied to unemployment compensation received in 2020. So, for 2021, Uncle Sam will once again fully tax unemployment compensation as if it were wages.
- Student Loans: Normally, if a student loan is canceled, forgiven, or otherwise discharged for less than the amount you owe, the amount of canceled debt is considered taxable income. However, starting in 2021, this rule is suspended for most canceled student loan debt that was incurred for a post-secondary education. The change is only temporary, though. In 2026, forgiven student loan debt will once again be taxed. The rule allowing workers to exclude up to $5,250 of college loans paid by their employer in 2020 from taxable wages was also extended through 2025. The $5,250 cap applies to both student loan repayment benefits and other educational assistance offered by an employer.
- Estate and Gift Tax: The lifetime estate and gift tax exemption for 2021 jumped from $11.58 million to $11.7 million — $23.4 million for couples if portability is elected by timely filing IRS Form 706 after the death of the first-to-die spouse. The estate tax rate remains steady at 40%. The gift tax exclusion remains $15,000 per recipient. So, you can give up to $15,000 ($30,000 if your spouse agrees) to each child, grandchild or any other person in 2021 without having to file a gift tax return or tap your lifetime estate and gift tax exemption.
- Education Tax Breaks: Unfortunately, the tuition and fees deduction was repealed beginning with the 2021 tax year. That "above-the-line" write-off was worth up to $4,000. However, to balance out the loss of the tuition and fees deduction, the phase-out thresholds for the lifetime learning credit were permanently increased. Beginning in 2021, the phase-out range for married couples filing a joint return is $160,000 to $180,000, and it's $80,000 to $90,000 for single filers. (The same phase-out ranges apply to the American Opportunity tax credit.) The income caps are also higher in 2021 for tax-free EE bonds used for education. The exclusion starts phasing out above $124,800 of modified AGI for couples and $83,200 for others ($123,550 and $82,350 for 2020). It ends at modified AGI of $154,800 and $98,200, respectively ($153,550 and $97,350 for 2020). The savings bonds must be redeemed to help pay for tuition and fees for college, graduate school or vocational school for the taxpayer, spouse or a dependent.
- Standard Mileage Rate: Standard mileage rate for business driving fell from 57.5¢ to 56¢ a mile. The mileage allowance for medical travel and military moves also declined from 17¢ to 16¢ a mile in 2021. However, the charitable driving rate stayed put at 14¢ a mile.
- Health Savings Accounts: The annual cap on deductible contributions to health savings accounts (HSAs) rose in 2021 from $3,550 to $3,600 for self-only coverage and from $7,100 to $7,200 for family coverage. People born before 1967 can put in $1,000 more (same as for 2020). Qualifying insurance policies must limit out-of-pocket costs in 2021 to $14,000 for family health plans ($13,800 in 2020) and $7,000 for people with individual coverage ($6,900 in 2019). Minimum policy deductibles remain at $2,800 for families and $1,400 for individuals.
- Flexible Spending Accounts: Health and dependent care flexible spending accounts (FSAs) generally run on an annual use-it-or-lose-it basis. There are limits to the amount you can contribute each year. However, because of difficulties some families faced when trying to use and manage their FSAs during the pandemic, some temporary rules were put in place to add even more flexibility to FSAs. For example, instead of losing unused FSA funds at the end of the year, employers can modify their FSA plans to allow a worker's unused funds from 2020 to be used in 2021 and unused funds from 2021 to be used in 2022.
- Dependent Care: For 2021, a family can sock away up to $10,500 in a dependent care FSA without paying tax on the contributions. Employers are also allowed to extend the maximum age of eligible dependents from 12 to 13 for dependent care FSAs for unused amounts from the 2020 plan year carried over into 2021.
Several of the "tax extender" deductions and credits were set to expire after 2020. Congress has renewed many of them on a temporary basis. Most of the extended tax breaks are for businesses, but several of them impact individual taxpayers.
Tax breaks for individuals that were extended until the end of 2021 include the:
- Mortgage insurance premiums deduction;
- Health coverage tax credit for medical insurance premiums paid by certain Trade Adjustment Assistance recipients and people whose pension plans were taken over by the Pension Benefit Guaranty Corporation;
- Nonbusiness energy property credit for certain energy-saving improvements to your home (e.g., new energy-efficient windows and skylights, exterior doors, roofs, insulation, heating and air conditioning systems, water heaters, etc.);
- Fuel cell motor vehicle credit;
- Alternative fuel vehicle refueling property credit.
- Two-wheeled plug-in electric vehicle credit.
- The exclusion for forgiven mortgage debt was also renewed through 2025
- The 26% rate for the residential energy efficient property credit was extended through 2022 (the credit applies to the cost of solar electric property, solar water heaters, geothermal heat pumps, small wind turbines, fuel cell property, and qualified biomass fuel property). The credit is set to expire after 2023.
Helpful websites:
Where’s my refund: https://www.irs.gov/refunds You Will Need: Social security number or ITIN; Your filing status; Your exact refund amount
IRS Taxpayer Estimated Payments EFTPS: https://www.eftps.gov/eftps/ The Electronic Federal Tax Payment System® tax payment service is provided free by the U.S. Department of the Treasury. After you've enrolled and received your credentials, you can pay any tax due to the Internal Revenue Service (IRS) using this system.
Connecticut Check the status of your refund: https://drsindtax.ct.gov/AUT/refundStatus.aspx?TXPYRTYP=I
What’s my 1099G amount:
https://drsindtax.ct.gov/AUT/1099GLogin.aspx?TXPYRTYP=I
Connecticut Estimated Tax Payments:
https://drsindtax.ct.gov/IND/ES/IT_FORM_CT1040ES_SELTAXYEAR.ASPX?DATTYPE=IND&TXPYRTYP=I
Social Security Administration:
https://www.ssa.gov/myaccount/index2.html