The American Rescue Plan Act of 2021 (ARPA) allowed a broad exclusion from gross income for discharged student debt, effective for tax years 2021 to 2025. ![]() These changes are effective for taxable years beginning after December 31, 2022. Those with adjusted gross incomes (AGI) greater than $1 million will have deductions reduced 80%, rather than using the calculation above. For those with AGI more than $220,650, the reduction is the lesser of: Standard and Itemized Deduction Limitation Changesįilers with incomes over $220,650 will generally see fewer tax benefits from the standard or itemized deductions. The effective date is tax year 2023 and later. Taxpayers can use the Alternative Method to calculate the subtraction amounts similar to prior law, if doing so results in a larger subtraction than the Simplified Method. For married taxpayers filing separately, the phase-out is 10% for each $2,000 of AGI over $50,000. The subtraction phases out by 10% for each $4,000 of AGI over these thresholds. The new Simplified Method allows taxpayers with adjusted gross income (AGI) below $100,000 for married joint returns - or $78,000 for single or head of household returns - to subtract all taxable Social Security benefits. The bill expanded Minnesota’s Social Security subtraction to allow taxpayers to subtract the greater of a new Simplified Method of calculating the subtraction or an Alternative Method (similar to the subtraction as calculated under prior law). Second, an income tax subtraction is provided related to damages received for nonphysical injuries and sicknesses, such as emotional distress, humiliation, and defamation, as a result of an abuse claim. The tax bill included two provisions related to sexual harassment or abuse settlements between an employer and an employee.įirst, when there is a financial settlement provided, the financial settlement cannot be provided as wages or severance pay to the employee regardless of whether the settlement includes a nondisclosure agreement. $78,000 for a single or head of household taxpayer.$100,000 for a married taxpayer filing a joint return or a surviving spouse. ![]() The subtraction phases out at these income thresholds, reducing it by 10% for each $2,000 of adjusted gross income exceeding the threshold:
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