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With the holidays officially over, tax season will be here soon—whether you’re ready or not. Your 2021 federal tax return must be electronically filed or postmarked by April 18, 2022, unless you file for an automatic extension. If you’re feeling overwhelmed by tax season this year, don’t sweat it—we’ve got some tax tips to help you jump-start your taxes this year.
Check your information with everyone sending you tax documents this year. If you’ve moved without putting in a change of address, you may miss important tax document delivery.
The IRS requires that W2s and other tax documents be postmarked by January 31, so you can expect to receive all your tax documents by mid- to late February at the latest. If you don’t receive something, follow up with the appropriate business or organization right away.
Some organizations that might need to send you tax documents include:
Gather and organize your tax documents early. This ensures you’re ready to file as soon as possible—a benefit if you’re getting a refund. It also helps you find potential issues or have time to track down missing information.
Here’s a checklist of some things you might need to file your taxes:
STOP! Did you check your information and gather all your documents? Do this right now! If you wait until April 14 to see if you have all the documents you need, you’re really going to regret not taking our advice now.
Tax brackets change regularly to keep up with inflation. A tax bracket is the range of taxable income you fall into. Your taxable income is your adjusted gross income minus applicable tax deductions. You can review this year’s tax brackets and use tables to find out what bracket you fall into and how much that impacts what you owe.
While you’re considering your tax bracket, consider whether you have to file an income tax return. For example, if you’re a college-age adult and your parent is claiming you as a dependent, you only have to file a return if you meet certain income thresholds or you qualify for a refund and want to get it. Check with your parent to determine if they’re claiming you as a dependent, as that does change how you claim yourself when you file.
The IRS provides a tool to help you understand if you have to file a tax return.
Taxes can be complicated. Look for software that:
Tax deductions work to decrease your taxable income. By bringing this number down, you may be able to fit into a lower tax bracket. That means you qualify for lower tax rates so you owe less in taxes.
The standard deduction is a preset dollar amount that’s subtracted from your AGI to help determine your taxable income. Your filing status—single, married filing together, married filing separately, head of household or widow(er) with a child—determines the amount you may deduct.
Filing Status | Standard Deduction Amount |
Single | $12,550 |
Married Filing Jointly | $25,100 |
Married Filing Separately | $12,550 |
Head of Household | $18,800 |
Qualifying Widow(er) with a Dependent Child | $25,100 |
Source: IRS Newsroom
Itemizing deductions is another option you can choose. To benefit from itemizing, your personalized deductions should be more than your standard deduction. For example, if you’re married and filing jointly, you must have more than $25,100 in itemized deductions.
But if you pay a mortgage, have high medical bills and make charitable donations, itemizing may work for you. Here are some common eligible deductions you can write off on your 2021 taxes:
A change for 2021 taxes due to the CARES Act allows you to deduct up to $300 in charitable donations without itemizing. It’s $600 for married couples filing jointly. This can help you reduce your total taxable income by a bit more than the standard deduction even if you don’t itemize.
Note that if you’re married filing separately, you and your spouse must both choose to either itemize your deductions or take the standard deduction. You can’t choose to do this differently.
Tax credits are different from deductions. Deductions lower your taxable income; tax credits directly impact the tax amount you owe. They reduce the amount dollar for dollar.
For nonrefundable tax credits, you can only reduce your tax liability to zero. With refundable tax credits, you can receive a refund of the excess amount.
Here’s a quick general example—you file Head of Household with an adjusted gross income of $55,000. You take the standard deduction of $18,800, which makes your taxable income $36,200. That puts you in the 12% bracket.
Tax credits can lower the amount of tax you owe. But you must meet specific qualifications, including established AGI limits. Be sure to review the criteria for eligibility to learn whether you qualify for any of these popular tax credits:
Plan ahead to best manage any money you get from a tax refund. Set up direct deposit with the IRS to get your money faster and then use it to help support your future financial goals.
As tax time approaches, be on the lookout for tax scams. Some common tax scams include:
Some individuals may be able to file taxes for free through the IRS, though income limitations and other qualifications apply. Even if you don’t meet those requirements, there are other ways to file your taxes for free.
You can contribute up to a certain amount to qualifying retirement plans before paying taxes. This effectively reduces your taxable income for the year. Here are some of the contribution limits for 2021:
A lot of work goes into preparing and filing your taxes. But getting organized early and having a plan can help you maximize your tax return refund.
It also helps you develop a plan to pay any taxes owed so you don’t fall into a financial trap. Wondering if taxes affect your credit score? Not directly, but they can create a situation that does! Stay on top of your credit with ExtraCredit® throughout the year so you know if anything is impacting your score.