Tax deductions

A guide to tax deductions for 2020, especially if you worked from home

After a year like no other, it makes sense that your 2020 tax return will be different from past years. Understanding which tax deductions apply to you and your particular situation could decrease the amount you owe the government and increase your tax return. There may even be things you don’t think about after a year filled with so much change.

The deadline for filing tax returns is now May 17

The COVID-19 pandemic has turned the world of work upside down in 2020. The number of employed Americans working from home in the past year has risen from 20% before the pandemic to 71% by the end of 2020, according to a Pew study. Research Center.

While working from home can certainly drastically change your tax situation, it’s also worth noting that deductions related to medical expenses, student loan interest, self-employment, and even charitable donations could all impact your income. amount you have to pay in taxes this year.

The Internal Revenue Service (IRS) has extended the deadline for filing tax returns until May 17, 2021, to give taxpayers more time to prepare their returns following the uncertainty of the past year and the complications caused by the coronavirus pandemic.

You can take advantage of the extra month by working with a tax professional to make sure your return is in perfect order and includes all the deductions that apply to you.

Standard Deductions vs Itemized Deductions

A standard deduction is a dollar amount predetermined by the IRS that your overall income is reduced from before it is taxed if you do not itemize your tax deductions. Although your standard deduction depends on your filing status, age, and other eligibility requirements, for 2020 the standard IRS deductions are as follows:

  • Single or married, separate deposit: $12,400
  • Married, filing jointly: $24,800
  • Head of household: $18,650

As noted by Kiplinger, taxpayers age 65 and older, or who are blind, can claim an additional standard deduction of $1,300 if married, filing jointly, or $1,650 if filing as single. or head of household.

If your standard deduction totals more than you would be able to deduct by itemizing your tax deductions, it is generally recommended that you choose to file with standard deductions. But even when you file taxes with a standard deduction, you may still be eligible to claim certain “over the line” deductions that don’t depend on the breakdown.

Since 2020 has brought so many changes for so many people, here are some deductions to consider when filing your personal income taxes this year:

Home office deductions

If you started working from home in 2020, you might want to know which home office expenses are eligible for tax deductions. Using home office write-offs on your taxes isn’t new, but it can be tricky to navigate.

Standard home office deductions allow eligible taxpayers to record deductions for mortgage interest, taxes, maintenance, and other expenses based on the percentage of their home used for business purposes. But here is the important part – not anyone working from home is eligible.

According to Turbo Tax, “If you are a remote working employee rather than an employer or business owner, unfortunately you are not eligible for the home office tax deduction.” However, some employees working remotely might still be eligible for income tax deductions or tax breaks depending on where you live.

Additionally, if it is a condition of your employment to maintain a home office or if it is necessary to maintain business operations (which may have happened in 2020), your home office could still be eligible for certain deductions at the federal level, provided you meet certain criteria. . The IRS website has a detailed publication that outlines the requirements for the home office deduction, so if you’re unsure, you can check to see if you qualify.

Self-employment deductions

If you were self-employed in 2020, it’s worth consulting the IRS self-employment tax regulations to determine what deductions you may be entitled to based on your unique tax situation.

Self-employed individuals who file a Form 1040 or 1040-SR Schedule C may also be eligible for an earned income tax credit (EITC) and can use the IRS’ EITC wizard to determine their eligibility. As part of the FFCRA, there are also new special IRS provisions for self-employed people and tax credits related to sick leave and family leave in 2020 that you may be eligible for.

Educator expenses

Teachers, counselors, administrators, and other education professionals have seen 2020 change just about everything about the way they do their jobs. According to the IRS, eligible educators can take deductions of up to $250 for expenses not reimbursed by their employer (or $500 for married couples of two educators filing jointly).

These expenses may include items such as supplies, continuing education courses, books, or technology related to your job. COVID-19 protective gear such as masks, cleaning supplies, and other similar items may also be included if purchased after March 12, 2020.

People affected by federally declared disasters like a hurricane, wildfire, tornado or the like — of which there were many in 2020 — may be eligible for additional tax deductions.

Even taxpayers who choose to file a standard deduction can take advantage of the benefits of catastrophe-related deductions by filing Form 4684 to claim a “qualified catastrophe net loss,” Kiplinger reported. Detailed instructions for the new catastrophe tax deductions for 2020 are available in IRS Publication 547.

With so much focus on the healthcare sector throughout 2020, it’s worth noting that any medical expenses you accrued last year for the diagnosis, treatment or prevention of disease may be eligible for a tax deduction.

As noted by US News & World Report, taxpayers may be able to subtract eligible health care expenses from their adjusted gross income as Itemized Deductions (AGI), as long as your total unreimbursed expenses do not not exceed 7.5% of your AGI.

Additionally, if you contributed to a Health Savings Account (HSA) last year, you may also qualify for a higher tax deduction if you meet the IRS criteria for 2020.

Student loan deductions

Under the Biden administration, major changes are expected to occur with respect to student loans, but we are not there yet. For 2020 tax purposes, certain taxpayers may be eligible to claim up to $2,500 in deductions based on interest paid on student loans as a top deduction. The IRS lists the student loan interest deduction criteria on its website, so you can check there to see if you qualify.

Child tax credits

If you’re a parent, you’ve probably heard about upcoming child tax credit changes under the U.S. bailout, including potential monthly payments of up to $250 ($300 for children under 6 years old) per child. While these payments are expected to begin as soon as this summer and can be based on your 2019 or 2020 tax return, they will not impact your 2020 return.

For 2020, taxpayers can still claim a child tax credit of up to $2,000 per child under age 17, as long as they meet IRS income and eligibility requirements.

If you adopted a child in 2020, you may be eligible for an adoption credit of up to $14,300 through the IRS for qualifying expenses, depending on your income level.

Charitable donations

If you were lucky enough to be able to help others in times of need in 2020, you may be able to include a charitable donation deduction on your tax return.

While itemized deductions for donations made to qualified charities are not uncommon, a new IRS provision for this year under the CARES Act allows taxpayers to deduct up to $300 in cash donations to charities qualify as a top deduction. You can learn more about charitable donation deductions on the IRS website.