Here are some 2021 tax law changes that you need to know when planning your taxes for 2021. Taxes are due on April 18 in 2022, and not on April 15 for 2021.
• Provisions in the CARES Act allow anyone who is impacted by Covid to take out up to $100,000 of retirement funds or a loan from their retirement account without incurring the 10% early withdrawal penalty for withdrawals before age 50 1/2. CARES Act, enacted in March, made it much easier for Americans under age 59½ to access the funds stashed in eligible CARES made it easier for people to access their savings in retirement accounts, including employer-sponsored 401(k) plans, 403(b) plans and individual retirement accounts (IRAs).
• The IRS loosened requirements for retirees to take required minimum distributions (RMDs) from their retirement plans. The 10% penalty waiver and the relaxed rules around RMDs only apply to 2020 unless reenacted by new legislation from Congress. Anyone who took an RMD in 2020 from certain retirement accounts is allowed to roll those funds back into a retirement account following the CARES Act RMD waiver for 2021.
• Stimulus checks which are considered tax credits under the CARES Act don’t count as “resources” for federal benefit programs like Medicaid. To qualify for Medicaid benefits in Illinois, your assets cannot exceed a certain amount, and your stimulus check is not counted as income or an asset for Medicaid eligibility.
The Illinois SALT Deduction Limit Work-Around for Pass-Through Entity Owners provides that for tax years beginning on or after December 31, 2021, through January 1, 2026, a pass-through entity may choose to pay a pass-through entity tax of 4.95% on income that would otherwise be taxable to members of the pass-through entity holding an ownership interest in it. SALT is a workaround to the $10,000 limitation on the federal deduction for state and local taxes, and the Illinois legislation is similar to that of other states so that at 4.95%, the Illinois entity level tax is the same rate as the Illinois individual income tax.
Individuals should talk to an experienced estate planning attorney to discuss how the 2021 tax law changes impact their estate plans.
Do you have questions about taxes and estate planning? Our experienced estate planning lawyers in Lombard, Illinois can advise you on the best options to protect your assets and loved ones. To talk to an estate planning attorney contact the Estate & Probate Legal Group at 630-864-5835.
We provide legal services in Cook, DuPage, Kane, Lake, and Will counties.