How to… Help Enhance Your 2021 Tax Return

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Enhance Your 2021 Tax Return

You just realized April 15th is right around the corner! Although the tax filing process can be stressful, which is the number one reason people procrastinate, there is nothing better than seeing a return check in the mail. No matter what you\’re planning to do with the money you hope to get, you’re probably hoping to earn back enough to meet your financial goals. Make the most of your income tax return this year!

  • Contribute to a traditional IRA (up to $6,000; additional $1,000 if you’re 50 or older).1
  • Itemize deductions if they are more than the 2021 standard deduction of $12,550 ($12,400 in 2020) for singles, $18,800 for heads of household ($18,650 in 2020), and $25,100 for those married filing jointly ($24,800 for 2020).2
  • Itemized deductions may include:3  
    1. Interest on a mortgage up to $750,000
    2. Charitable donations worth up to 60% of your adjusted gross income
    3. The portion of medical and dental expenses that exceed 7.5% percent of adjusted gross income
    4. Combined state and local sales, income and property taxes, capped at $10,000
    5. Casualty and theft losses attributed to a declared federal disaster
  • Deduct up to $2,500 in interest paid on student loans.4
  • If you have a high deductible health care plan, deduct Health Savings Account (HSA) contributions up to $3,600 ($7,200 for family coverage; extra $1,000 if age 55 or older), up from $3,550 and $7,100, respectively, in 2020.5

 

1 Jean Folger. Investopedia. Dec. 10, 2020. “Roth and Traditional IRA Contribution Limits for 2021.” https://www.investopedia.com/roth-and-traditional-ira-contribution-limits-for-2021-5085118. Accessed Jan. 6, 2021.
2 Mark P. Cussen. Investopedia. Dec. 17, 2020. “An Overview of Itemized Deductions.” https://www.investopedia.com/articles/taxes/08/itemized-deductions-overview.asp#citation-26. Accessed Jan. 6, 2021.
3 Ibid.
4 Ibid.
5 Darla Mercado. CNBC. May 20, 2020. “IRS will allow people to put away more money in health savings accounts.” https://www.cnbc.com/2020/05/20/irs-will-allow-people-to-save-more-money-in-health-savings-accounts.html. Accessed Jan. 6, 2021.

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