Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Important Changes This Year

Tax Law Changes

Tax Law Changes

There are several temporary and permanent changes included within the scope of VITA/TCE. These changes are summarized below. This is an overview only. For additional details on temporary changes, review the Temporary Provisions lesson in this publication. For permanent changes, review the applicable lesson in this publication: Retroactive Changes for 2020

  • Unemployment compensation: For tax year 2020 only, the first $10,200 of unemployment compensation is not taxable for most households. This tax benefit is only available to those whose modified adjusted gross income is below $150,000 during 2020. The same income cap applies to all filing statuses. There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return. For details see IR 2021-71.
  • Excess Advance Premium Tax Credit: The requirement to repay 2020 excess APTC was suspended. Taxpayers with excess APTC for 2020 did not need to report the excess APTC or file Form 8962. The IRS automatically reduced the repayment amount to zero. In addition, the agency automatically reimbursed anyone who had already repaid their 2020 excess APTC. Taxpayers do not need to file an amended return.

2021 Changes

  • Recovery Rebate Credit: The Third Economic Impact Payment was authorized by the American Rescue Plan Act of 2021 as an advance payment of the 2021 Recovery Rebate Credit. Eligible individuals who filed a joint tax return will receive up to $2,800, and all other eligible individuals will receive up to $1,400. Those with qualifying dependents on their tax return will receive up to $1,400 per qualifying dependent. For details on who is eligible to claim this credit, see the Payments and Miscellaneous Refundable Credits lesson in Publication 4491.
  • Child and Dependent Care Credit: The new law increases the amount of the credit and eligible expenses for child and dependent care, modifies the phase-out of the credit for higher earners and makes it refundable. See the Temporary Provisions lesson in Publication 4491 for details.
  • Earned Income Tax Credit: For 2021 only, more taxpayers without qualifying children can qualify for the Earned Income Tax Credit (EITC). That’s because the maximum credit is nearly tripled for these taxpayers and is, for the first time, made available to both younger workers and senior citizens. Another change is available to both taxpayers without qualifying children and families with qualifying children. For 2021, it allows them to choose to figure the EITC using their 2019 income, as long as it was higher than their 2021 income. In some instances, this option will give them a larger credit. See the Temporary Provisions lesson in Publication 4491 for details on these changes.
  • Changes expanding the EITC for 2021 and future years include:
    • Singles and couples who have Social Security numbers can claim the credit, even if their children don’t have SSNs. In this instance, they would get the smaller credit available to taxpayers without qualifying childen. In the past, these filers didn’t qualify for the credit.
    • More taxpayers who also have investment income can get the credit. Starting in 2021, the limit on investment income is increased to $10,000. After 2021, the $10,000 limit is indexed for inflation. The previous limit was $3,650.
    • Special rule for separated spouses. Taxpayers can claim the EIC if they are married, not filing a joint return, had a qualifying child who lived with them for more than half of 2021 and either:
  • lived apart from their spouse for the last 6 months of 2021, or
  • are legally separated according to state law under a written separation agreement or a decree of separate maintenance and didn't live in the same household as their spouse at the end of 2021.