Looking Ahead to 2021
/Reflecting back on this past tax season, I can only say I am glad it is over. Already, 2021 has seen more tax law changes than some full years. These changes challenged us to stay on pointe, at the top of our game, as my ballet dancer at home would say.
Looking ahead to this year, we will see tax law intended to continue to help boost the economy, face the economic effects of the pandemic, all while targeting the low end of the income scale. The most recently issued American Rescue Plan Act of 2021, (ARP) was signed into law in March and has a focus on family that goes beyond the third round of stimulus checks issued.
Included in this Act is a child and dependent care credit increase (for 2021 only). The Act increases the eligible expenses, modifies the phase-out for higher earners and is now refundable, meaning an eligible family can get it even if they owe no tax. In addition, workers may be able to set aside more in their Dependent Care FSA with an increase from $5,000 to $10,500, if the plan permits.
ARP also increased the Child Tax Credit, making it available for 17-year-old dependents and allowing families to receive up to half of it in advance beginning in July. Advanced payments received must be tracked. This credit will be fully refundable for 2021, rather than limited to $1,400.
The ACA Premium Tax Credits for 2021 and 2022, are available to more individuals and in larger amounts. For the 2020 tax returns only, those who received excess premium assistance were not required to return the excess. Continuing with changes in health insurance coverage, there is an expanded COBRA credit providing a 100 percent reduction of premiums for eligible individuals for continuation of coverage through September.
I can only imagine the number of provisions to come. As I said, I’m glad this tax season is over. But as another CPA put it, it’s like childbirth. You forget the pain, until the next one comes along! Enjoy your summer!
- Pam Smitson, CPA, CGMA, Smitson Erhart-Graves Financial Advisors
