Advance Child Tax Credits: Monthly advance payments began 7/15/21. Any amount paid will need to be reported on your 2021 return. If the advance exceeds the allowable child tax credit, the excess will increase your tax liability.
100% Deduction for Business Meals: This is a temporary deduction for expenses paid or incurred after 12/31/20 and before 1/1/23 for food and beverages provided by a restaurant. The new IRS guidelines explain when the 100% deduction applies and when the 50% limitation continues to apply.
Dependent Care Benefits: An employee may exclude from gross income dependent care assistance program (DCAP ) benefits by contributing to the DCAP through salary reduction, and the DCAP may reimburse the employee for dependent care expenses incurred during the year with pre-tax earnings.
Flexible Spending Accounts: Your employer may permit a 12 mo. grace period (previously 2 1/2 mos.) for unused balances at year end 2021. This means that you could potentially roll over the entire unused FSA balance from 2021 to 2022.
Charitable Contributions: The maximum non-itemized deduction available for single tax payers is $300 ($600 for joint filers). The limit for itemized cash contributions is 100% of your income and 50% of your income for itemized non-cash contributions.
Lifetime Learning Credit: The tuition and fees deduction has been replaced with an expanded income limit for the Lifetime Learning Credit. The credit is worth up to $2,000 pert tax return and covers many of the same costs as the prior deduction.
Unemployment is fully taxable: While in 2020 you could exclude $10,200 ($20,400 for joint filers) of unemployment compensation benefits, as of the current date, that exclusion will not be available for 2021.
Sources: EA Journal July/August 2021
Tenenz Tax Update 2021