Five Easy Ways to Get Tax Benefits in 2021

Saturday, October 31, 2020, 6:00 AM | Leave Comment

Though 2020 has lasted several years, it will be over in a few months. That means the 2021 tax season is right around the corner. It also means potential headaches for filers.

Due to the pandemic and other events, many have lost their homes and jobs. They’ve relied on unemployment insurance, Lost Wages Assistance (LWA), and the Paycheck Protection Program (PPP) to make ends meet. Thus, their taxes might look a lot different.

Also, their chances of owning this year might increase. To minimize these risks, here are five easy ways to get tax benefits in 2021.

5 Easy Ways to Get Tax Benefits in 2021

  1. Donate

    Donating money or items can significantly reduce your tax liability if you made less than $100,000 in 2020. To take advantage of this benefit you need to itemize everything you have donated. Also, you want to verify the places you gave to are tax-deductible. For instance, a church tithing is considered a donation. Payment to join a mission trip is not deductible.

    One of the major ways to take advantage of this benefit is to donate your vehicle. In many cases, the good you feel outweighs the tax benefits of donating a car.

  2. IRA Contributions

    If you lost your job, then perhaps you rolled your retirement funds over to a ROTH IRA. You may even continue to contribute to it when you have money on hand. This is good news as it’s definitely a tax benefit for 2021.

    In fact, you can keep putting money into that IRA fund until it’s time to file your taxes. Those contributions can be deducted from your 2020 records and save you a good deal of money.

  3. Open A Health Savings Account

    Another option that you should take whether or not you’re working is to open a Health Savings Account (HCSA). Money that’s deposited into this type of account can be used for expenses normally not covered by your health insurance. This can be in the form of deductibles or extras like television and phone use from hospital stays.

    Simply opening an HCSA doesn’t qualify you for the benefit. You have to regularly contribute. Even a small amount can help you with your tax filing.

  4. Deduct Your Side Hustle Expenses

    This one only works if you decide to itemize your taxes. If you stick with the standard 1040, then this benefit will be left out. Definitely consider this, especially if your side hustle turned into a full-time position in 2020.

    When you itemize your business expenses you can deduct utility bills related to its operation. Other items you can add are current and new equipment and payments to services required for the operation.

  5. Enroll In College

    Though it might be too late to do this in 2020, you can certainly enroll in a college for the 2021-2022 academic year. You might want to do this if you were let go at your previous job and are looking for a new career path.

    Almost everything related to a college education is a tax benefit. You receive credit for attending college. You can deduct expenses for room & board as well as books. Even if you took a loan out you can deduct it from your taxes.

Needless to say, there are several options to receive tax benefits in 2021. Use them in your 2020 filing to see which ones provide the maximum payoff. If you feel uncomfortable recording them on your own, then seek out the services of a tax preparer or CPA to complete the task.

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