The 2021 tax season in New Jersey is well underway, as filers gather their W-2s and other documents for their returns for the 2020 tax year.
In the first tax year since the coronavirus began to affect life and work in the United States, millions of Americans are filing returns that look quite different from in years past.
Here are seven things to know about this tax season in New Jersey:
Do The Stimulus Payments Count? No, the two federal economic relief bill payments sent to all Americans in 2020 should not be included in your gross income, the Internal Revenue Service has stated. Do not include it on your taxable income. It will not reduce your refund or affect your eligibility for federal government assistance or benefit programs, according to the IRS.
How About Unemployment Benefits? Yes, those count. As the pandemic forced the United States unemployment rate to skyrocket to an unprecedented 14.7 percent by April, more people than ever must report unemployment income during this tax season.
While the unemployment benefits are taxable, they are not considered “earned” income and won’t be used against you in determining whether you are eligible for the Earned Income Tax Credit, Jackson-Hewitt points out. Generally, states do not withhold taxes on unemployment benefits.
Do I Qualify For Earned Income Tax Credit? The earned income tax credit exists to help middle- to low-income individuals and families reduce the amount of taxes they pay and can help them get more in refunds, according to the IRS.
The IRS has an online tool to see if you qualify for the credit.
Standard Deduction Changes:Â The standard deduction is a dollar amount that reduces the amount of income on which you are taxed and varies according to your filing status.
The standard deduction for each filing status for the 2020 tax year has changed slightly from 2019, according to the IRS:
- Single or married filing separately: $12,400 — Up from $12,200 for 2019.
- Married filing jointly or qualifying widow: $24,800 — Up from $24,400 for 2019.
- Head of household: $18,650 — Up from $18,350 for 2019.
Congress passed major tax legislation in 2017. The bill signed by President Donald Trump that year kept the seven tax brackets but lowered the number of the tax rates. Additionally, it changed the income thresholds at which the rates apply.
New tax rates
These new rates went into effect for the 2018 tax year and have remained since. Here’s a reminder for the 2020 tax year:
Tax Brackets And Thresholds For Single Filers In 2020 Tax Year
Tax Rate — Taxable Income Bracket
10 percent — $0 to $9,525
12 percent — $9,526 to $38,700
22 percent — $38,701 to $82,500
24 percent — $82,501 to $157,500
32 percent — $157,501 to $200,000
35 percent — $416,701 to $418,400
37 percent — More than $500,000
Tax Brackets And Thresholds For Married Couples Filing Jointly in 2020 Tax Year
Tax Rate — Taxable Income Bracket
10 percent — $0 to $19,050
12 percent — $19,051 to $77,400
22 percent — $77,401 to $165,000
24 percent — $165,001 to $315,000
32 percent — $315,001 to $400,000
35 percent — $400,001 to $600,000
37 percent — More than $600,001Â
When Is Tax Day This Year?
Tax day is back to the traditional April 15. The deadline was extended for three months a year ago due to the then-new coronavirus pandemic. April 15 falls on a Thursday in 2021. Before the pandemic, the only reason Tax Day would be delayed is if April 15 fell on a weekend or local holiday in Washington, D.C.
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