IRS tax deadline extended, but don’t delay just yet…

The IRS announced early last week that the tax filing deadline for the 2020 tax year has been extended from April 15, 2021 to May 17, 2021. You don’t need to do anything to get this extension, it’s automatic and it applies to payments too, not just filing. But don’t delay finishing your taxes just yet. The change only applies to your federal taxes, it doesn’t affect state tax deadlines. Some states are following suit and matching the new federal deadline, but not all states have made a decision yet. You can check your state tax authority on this website provided by the IRS. Unless you have a real need to delay, it’s probably best to go ahead and file as planned before the change.

We’re resuming our series on taxes with a short explainer on tax deductions.

While credits reduce the amount of taxes you owe dollar for dollar, deductions aren’t quite as powerful. A tax deduction reduces your taxable income, which in turn reduces the taxes you owe. But a $500 tax deduction doesn’t mean you pay $500 less in taxes, it means the income you’re taxed on is reduced by $500.

For most people the standard deduction is the simpler and smarter choice. But for others itemizing deductions one by one will save them more money. What’s the difference and how do you know where you fall? We’ve got the answers right here.