Understanding the New Tax Law: Changes for 2021

The new tax law for 2021 has been released by the government. It is important to understand the changes introduced in this law and how it affects taxpayers. Here are some of the key changes introduced in the new tax law for 2021.

Firstly, the standard deduction has been increased. For single taxpayers, the standard deduction has increased to $12,550. For married couples filing jointly, the deduction has increased to $25,100. This increase in the standard deduction will result in lower taxes for many taxpayers.

Secondly, the tax brackets have been adjusted for inflation. Taxpayers will pay a lower rate of tax on their income due to this adjustment. The adjustments have been made to all the tax brackets across all filing statuses.

Thirdly, there have been changes to the child tax credit. The credit has increased to $3,000 per eligible child and $3,600 for children under the age of six. This credit is refundable, which means that even taxpayers who have no tax liability can benefit from it.

Fourthly, there have been changes to the Earned Income Tax Credit (EITC). For taxpayers with no children, the maximum credit has increased to $543. For taxpayers with one child, the maximum credit has increased to $3,618. For taxpayers with two or more children, the maximum credit has increased to $6,660.

Lastly, there have been changes to the retirement account contribution limits for certain taxpayers. For the 401(k) account, employees can contribute up to $19,500. For those aged 50 years and above, the catch-up contribution limit has increased to $6,500.

In conclusion, it is important for taxpayers to understand the new tax law for 2021 and how it affects them. Consult with a tax professional for guidance on how to maximize tax savings under the new law.

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