Tax Tips 2021

Money taken from retirement account

If a taxpayer pulled money out of their retirement account for coronavirus-related issues and does not intend to repay it within three years, one-third of the tax should be paid with their 2020 return.

Mortgage insurance premiums

The treatment of qualified mortgage interest premiums as qualified residence interest has been extended through 2021.

Charitable deduction for non-itemizers

Taxpayers who don’t itemize can still take an above-the-line deduction for charitable contributions up to $300.

Meal expenses

While not reflected on 2020 returns, some taxpayers will be happy that the three-martini lunch is back. A 100 percent business deduction (rather than the current 50 percent) is allowed for business meals as long as the expense is for food or beverages provided by a restaurant. This is effective for expenses incurred after Dec. 31, 2020, and expires at the end of 2022.

RMDs

The required minimum distribution requirement for all retirement plans has been waived for 2020.

Recovery Rebate Credit

Individuals who were eligible for an Economic Impact Payment but did not receive one, or were eligible for a larger payment than they received, will be able to claim a Recovery Rebate Credit when they file their 2020 Form 1040 or 1040-SR. Their EIP will need to be reconciled with any rebate credit amount for which they are eligible on the recovery rebate worksheet on their 2020 Form 1040 or 1040-SR.