Well, 2020 is finally over and, God-willing with the new vaccines, the COVID virus will be trending downward. But there is something new to worry about in 2021, namely last year’s income taxes.
New tax form for seniors: For 2020 taxes, seniors can use the two-page 1040-SR form, which uses a bigger font than the standard 1040 form, has more spacing and is better at contrasting colors. Taxpayers who turned 65 on or before Jan. 1, 2021, can use the new form for their 2020 returns. For married couples filing jointly, only one of them needs to be 65 to use the form.
No alimony deduction: If you are recently divorced and paying or receiving alimony, the IRS will no longer factor those payments into your taxes. That could make a big impact on your payment or refund.
No ACA individual mandate penalty: The Affordable Care Act’s individual mandate expired this year, so if you didn’t get health insurance in 2019, you no longer have to pay a penalty.
Medical expense deductions: Congress and the IRS made it harder this year to deduct medical expenses. If you itemize deductions, you won’t be able to write off eligible, out-of-pocket health care expenses unless they exceed 10% of your adjusted gross income. For some families with big medical bills, qualified medical and dental expenses will remain deductible. You can only deduct “unreimbursed” medical expenses to the extent they exceed 7.5% of AGI.
Increased standard deductions: On the positive side, standard deductions are a bit higher again, $12,800 for single tax filers and those married but filing separately. For married couples filing jointly, the standard deduction is $24,800. Individuals over the age of 65 get an additional $1,300 on top of the standard individual deduction.
Tax preparation fees: You cannot write off costs for tax preparation assistance through 2025 under new tax law changes, unless you’re a self-employed worker.
Sources: The balance.com, CNCB.com, AARP, IRS.gov, Aging.com
Al Brandenburg, Maricopa Senior Coalition.
This column appeared in the February issue of InMaricopa magazine.