As we step into another year with the pandemic situation still not coming to an end, filing taxes can be a tough job especially if you can’t get a hand on your tax filer because of the tax filing rush. If you are gearing up to file taxes, you should know some of these tax law changes for 2021-22. These will help you keep an eye on the benefits and the possible pitfalls of the new changes in the law.
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Foreign-Earned Income Exclusions
There are usually exclusions in tax that are determined by inflation. This year, expats can exclude up to $108,700 of their foreign-earned income from U.S. tax. This amount is surprisingly greater than the tax amount excluded in the year 2020 2hich summed up to $107,600.
The standard number of deductions was higher in 2021. The not very comforting news is that the standard deduction for married filing jointly has increased and rounds up to $18,800 approximately.
The news isn’t good for single taxpayers either because the amount has also increased for them to $12,550. Moreover, the “Head of the Household” is also required to pay more tax now which sums up to a total of $18,800. Now if you have a larger household, you will be at an advantage because you will be able to apply for a lower tax rate as the head of the household of a large number of people.
Stimulus Payments (Economic Recovery Rebate)
Your pending stimulus payments can be a blessing for you because you can now use them to get a refund on your 2021 tax return. If you don’t have enough experience with the process as a US expat, you can always call in an expat tax consultant to help you out with the process. The tax consultant can help you find out whether you are eligible for this scenario or not.
If you have money short on the first two rounds of payments that were not paid or which you did not claim on your federal tax return, then there’s some good news for you. You can be eligible for a third recovery rebate that will sum up to a total of $1,400 per individual. These funds will automatically land in your U.S government bank account in a given period of time.
If by any means you didn’t qualify in 2020 for the first two payments, you’ll probably be eligible again in 2021, depending on your income level.
Charitable contributions have not been so helpful to people but in the hopes of getting some money back, people do like to shed some light on them. In the previous years, an average taxpayer could claim up to $25,100 in charitable contributions if they paid more than the required annual amount. Now the amount they get back used to depend on the amount of money they paid in charitable incomes.
So, these were some of the changes made in the tax law that you should know. If there are still ambiguities that you may be facing in filing your taxes properly then you should hire a tax consultant to help you with the process.