Tax day is Monday; Here are the main changes that can save money

Tax day is Monday;  Here are the main changes that can save money

We went to tax expert John Warren to help us sort through the dozens of changes. He says because the federal unemployment exclusion is structured the way it is, it might benefit couples where only one spouse lost their job to file separately this year because the income limit is the same if you file as an individual or jointly. In Massachusetts, your income has to be under twice the poverty level, which is $25,760 for an individual and $53,000 for a family of four. “That has a chance to save you a couple of thousand dollars in taxes,” Warren said.

Massachusetts followed suit, exempting $10,200 from state income tax but with different income limits. So Congress made what’s probably the biggest tax change this year, excluding the first $10,200 in unemployment from federal taxes.

For the feds, you qualify if you or you and your spouse combined made less than $150,000 in 2020. As the world shut down last spring, millions of people turned to unemployment benefits and many would have found themselves with a surprise tax bill this spring.

But how do you file this year, if last year’s tax return was never processed? The IRS says a million 2019 returns are still unfinished, as of April 30. And among those who’ve waited nearly a year is Janet Richardson. This year’s 1040 form has a new line, called the “Recovery Rebate Credit.” It’ll either reduce the amount of tax you owe or increase your refund if you’re owed one of both of last year’s stimulus payments.

And, if you’re missing one of last year’s stimulus payments you can claim that when you file. There are a number of other changes as well that could boost refunds including no 10 percent penalty if you were financially impacted by COVID and withdrew money from a 401(k) last year. Also, anyone can deduct $300 in cash charitable contributions, even if you don’t itemize.

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