COLORADO – The Colorado 2021 tax season is in full swing as applicants collect their W-2s and other documents for their 2020 tax returns.
In the first tax year since the coronavirus hit life and work in the United States, millions of Americans file statements that look very different from previous years.
Here are five things to know about this Colorado tax season:
When is tax day this year? The Colorado Department of Revenue and the Internal Revenue Service have postponed the tax deadline for individuals to May 17th. Prior to the pandemic, tax day would only be delayed if April 15 falls on a weekend or local holiday in Washington, DC
Do the incentive payments count? No, the two federal economic relief payments sent to all Americans in 2020 shouldn’t be included in your gross income, the Internal Revenue Service has stated. Don’t count it as part of your taxable income. According to the IRS, this will not reduce your reimbursement or affect your eligibility for government assistance or benefit programs.
What about unemployment benefits? Yes, they count. With the pandemic rocketing the US unemployment rate to an unprecedented 14.7 percent by April, more people than ever will have to report unemployment income this tax season.
Although unemployment benefits are taxable, they are not considered “earned” income and are not used against you to determine whether you are eligible for the income tax credit, Jackson-Hewitt points out. In general, states do not withhold taxes on unemployment benefits.
According to Jackson-Hewitt, job search costs are no longer deductible.
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What changed in the November 3rd elections? The Coloradans voted on Nov. 3 to commemorate the “Gallagher Change” that limited home ownership to 45 percent of the nation’s property tax base and adjusted property valuation rates to maintain the required rate. Before the election, the legislature passed a bill that laid down the assessment bases for property tax – 7.15 percent for residential property and 21 percent for non-residential property.
Colorado voters approved Proposition 116, which permanently lowers the state income tax rate (for both corporate and individual income tax) from 4.63 percent to 4.55 percent. This change is retroactive to January 1st.
Voters in our state also adopted Proposition 117, which requires voter approval before the state creates new state-run government corporations that face fees of more than $ 100 million in their first five years of existence. Until the proposal was approved, these state-owned corporations were exempt from taxpayers’ Bill of Rights (TABOR) restrictions.
Am I eligible for an income tax credit? The income tax credit is designed to help middle- to low-income individuals and families lower the taxes they pay and help them get more refunds, according to the IRS.
The IRS has an online tool to see if you qualify for credit.
Changes to the standard deduction: The standard deduction is a dollar amount that reduces the amount of income on which you are taxed and varies based on your enrollment status.
The standard deduction for each filing status for the 2020 tax year has changed slightly compared to 2019, according to the IRS:
- Single or married registration separately: $ 12,400 – down from $ 12,200 for 2019.
- Joint marriage or qualifying widow: $ 24,800 down from $ 24,400 in 2019.
- Head of household: $ 18,650, down from $ 18,350 in 2019.
Congress passed important tax laws in 2017. The bill signed by President Donald Trump that year kept the seven tax brackets, but lowered the number of tax rates. In addition, the income limits above which the rates apply have been changed.
These new rates came into effect for the 2018 tax year and have remained since then. Here’s a reminder for the 2020 tax year:
Tax brackets and thresholds for single parents in the 2020 tax year
Tax Rate – Taxable Income
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 together in the 2020 tax year
Tax Rate – Taxable Income
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 $ 600,001