As the 2021 filing season is quickly approaching, we would like to remind you of important tax changes that will take effect.
Standard Deduction
The standard deductions are increasing based on the federal law; beginning January 1, 2021, from:
- $12,400 to $12,550 for single and married/registered domestic partner filers filing separately;
- $18,650 to $18,800 for head of household filers;
- $24,800 to $25,100 for married/registered partners filing jointly and qualifying widow(er) with dependent child(ren) filers;
- An updated worksheet is available for use by dependent filers.
Additional Standard Deduction: If born before January 2, 1957, or blind, an additional standard deduction of $1,350 ($1,700 if single or head of household) is allowed – use Schedule S, Calculation G-1. The Schedule S, Calculation G-1 must be submitted with your return. When married filing separately, you may take an additional standard deduction for your spouse/registered domestic partner only if your spouse/ registered domestic partner had no gross income, is not filing a return, and cannot be claimed as a dependent by another taxpayer.
Earned Income Tax Credit
The American Rescue Plan Act of 2021 includes changes to the Earned Income Tax Credit. For taxable years after December 31, 2020:
- Taxpayers may now be eligible for childless earned income in the case of qualifying children who fail to meet certain identification requirements
- The earned income tax credit is now allowed in the case of separated spouses if certain requirements are met
- The investment income test is increased from $3,650 to $10,000, adjusted for inflation after 2021.
Temporary Special Rules for 2021 only:
- If your earned income in tax year 2021 is less than your earned income in tax year 2020, the earned income credit for tax year 2021 can be determined by substituting your tax year 2019 earned income for year tax year 2021 earned income.
- In case of a joint return, the earned income of the taxpayer for taxable year 2019 must be the sum of the earned income of each spouse for such taxable year.
- In the case of individuals without qualifying children, the earned income credit is expanded by decreasing the minimum age of claimants from 25 to age 19, except that is age 24 for a specified student, or age 18 for a qualified formed foster youth or qualified homeless youth.
- The maximum age of 65 has been eliminated.
Schedule H - Homeowner and Renter Property Tax Credit
- The real property tax credit is now based on your DC real property tax bill for tax year 2021. Do not include special assessments, interest penalties and services charges.
- Schedule H federal Adjusted Gross Income (AGI) eligibility threshold for under age 70 increases to $56,200.
- Schedule H federal AGI eligibility threshold for age 70 and older increases to $76,700.
- A registered taxpayer using the web portal, MyTax.DC.gov will have the ability to file a Standalone Schedule H.