By Brad Singer
Tax season is just weeks away, and as you prepare, don’t forget to consider eligible tax deductions and credits. With all the changes to tax laws in 2021 to now consider, navigating all the new deductions and credits can be a challenge.
- Child tax credit
Got kids? The new child tax credit was made fully refundable in 2021 and increased to up to $3,600 per year per child through age 5, and up to $3,000 per year for children ages 6 to 17. (Parents of newborns born in 2021 can also claim this credit in 2022.) Eligible families automatically received half the total of the payments in advance monthly installments in July through December 2021, unless they unenrolled. When families file their taxes in 2022, they’ll get the remainder of the benefit they didn’t get through the 2021 advance monthly installments. Even if a parent makes little to no income, they are still eligible for the expanded child tax credit, but payment amounts do phase out with higher incomes.
- Recovery rebate credit (for a missing stimulus payment)
If you never received your third stimulus payment and were eligible or if you weren’t paid the full amount, you may be eligible for the Recovery Rebate Credit. Missing first and second payments can only be claimed on your 2020 tax return, but missing third payments can be claimed when you file your 2021 tax return in 2022.
- Saver’s credit
If you make contributions to an individual retirement account or employer-sponsored retirement plan, such as a 401(k), you may qualify for the saver’s credit. You must be at least 18 years of age; you can’t be a full-time student and no one else can claim you as a dependent on their tax return. The amount of the credit depends on your AGI, but can be between 50%, 20% or 10% (the maximum you could receive is $1,000 if filing alone or $2,000 if filing jointly).
Brad Singer, CFA lives in Vail, AZ and is owner of Vail Financial Advisors, a financial planning and investment advisory firm registered in Arizona. Vail Financial Advisors does not provide legal or tax advice, and the information provided is general in nature and should not be considered legal or tax advice. Consult an attorney, tax professional, or other advisor regarding your specific legal or tax situation.