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MASON & ASSOCIATES, LLC

Additional Reminders When Filing Your 2021 Tax Returns

February 7, 2022

Please see below for frequently overlooked tax deductions and other useful tips. 

Virginia Long Term Care premium deduction:

  • If you paid for long term care premiums in 2021 and did not deduct these premiums on your Federal return you may be entitled to a deduction.
    • Deducted on Virginia Schedule ADJ, Code 106
  • If you are not a resident of Virginia your home state may have a similar deduction. 

Virginia 529 Deduction:

  • Virginia529 account owners who are Virginia taxpayers may deduct contributions up to $4,000 per account per year with an unlimited carryforward to future tax years, subject to certain restrictions.
    • Deducted on Virginia Schedule ADJ, Code 104
  • Those age 70 and above may deduct the entire amount contributed to a Virginia529 account in one year.
  • If outside of Virginia, check your state for a similar deduction. 

Qualified Charitable Distributions (QCDs):

  • For those over 70.5, Qualified Charitable Distributions of up to $100,000 made directly from your IRA to a qualified charity are not included in income. 
  • Please make your tax preparer aware of any qualifying distribution made from your IRA to charity so they can appropriately exclude the income. 

IRA to Roth IRA Conversions:

  • Please let your tax preparer know of any IRA to Roth IRA Conversions that were completed in 2021 as they may or may not be fully taxable and have additional reporting requirements (Form 8606). 

CSRS/CSRS Offset VCP to Roth IRA:

  • This transfer does not constitute a taxable event, and will be reported on Form 1099-R.

Estimated Tax Payments:

  • If you made any estimated tax payments in 2021 please be sure to inform your tax preparer of the amount and date of the payment(s) so they are appropriately included on your tax return. 

Donor Advised Fund Contributions:

  • Contributions to Donor Advised Funds are deductible in the year in which they are contributed (not the year when the funds are disbursed). 
  • If we assisted with the transfer of assets into a Donor Advised Fund we can provide a Substantiation Letter to you and your tax preparer. 

Non-cash Charitable Contributions:

  • Donations such as miscellaneous household items or other goods may require the filing of Form 8283.
  • Donations of stocks and other securities are also reported on Form 8283.
  • Please make your tax preparer aware of all of your cash and non-cash donations to charity. 

Irrevocable Trusts and the 65-day election:

  • Please contact us if you are involved with an irrevocable trust. 

Itemized Deductions vs. Standard Deduction

  • By default, tax software will choose the larger of your itemized deductions or the standard deduction ($25,100 Married Filing Jointly in 2021).  However, states such as Virginia require that if the standard deduction is taken on the Federal return, that the standard deduction for Virginia must also be taken.  When Federal itemized deductions are close to the Federal standard deduction, it is often advantageous to “force” itemized deductions on your Federal tax return which will result in a higher Federal tax bill, but may result in an overall (Federal and Virginia combined) lower tax bill due to the potentially increased savings from a higher itemized deduction on Virginia.  Therefore, we recommend adding up your itemized deductions, and if they are close to the standard deduction, consider “forcing” itemized deductions and seeing what your total taxes (both Federal and Virginia) come out to.