After a year like no other, it makes sense that filing your 2020 taxes is different from previous 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 might even be a few things you don’t think about after a year filled with so many changes.
The tax filing deadline is now May 17th
The COVID-19 pandemic has changed the world of work in 2020. The number of Americans employed work from home in the past year, has fallen from 20% before the pandemic to 71% by the end of 2020, according to a study by the Pew Research Center.
While working from home can certainly dramatically change your tax situation, it’s also worth noting that deductions for medical expenses, student loan interest, self-employment, and even charitable donations could all have an impact on your income. amount you owe in taxes this year.
The Internal Revenue Service (IRS) has extension of the tax filing deadline to May 17, 2021, in order 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 top condition and includes all of 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 before it is taxed if you do not itemize your tax deductions. While your standard deduction depends on your filing status, age, and other eligibility requirements, for 2020, the Standard IRS Deductions are the following:
- Single or Married, separate deposit: $ 12,400
- Married, joint deposit: $ 24,800
- Head of family: $ 18,650
As Kiplinger reports, taxpayers aged 65 and over, 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 what you would be able to deduct by itemizing your tax deductions, it is generally recommended that you choose to produce standard deductions. But even when you file taxes with a standard deduction, you can still claim certain âabove the lineâ deductions that are not dependent 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 qualifying 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’s the important part – not everyone working from home is eligible.
According to Turbo Tax, âIf you are a remote working employee rather than an employer or business owner, unfortunately you are not entitled to the home office tax deduction. However, some employees working remotely might still be eligible for 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 occurred in 2020), your home office may 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 home office deduction requirements, so if you are not sure you can check if you qualify.
If you were self-employed in 2020, it’s worth taking a look at the IRS tax regulations for self-employed workers to determine the deductions you may be entitled to based on your specific tax situation.
Self-employed individuals filing a Form 1040 or 1040-SR Schedule C may also be eligible for an Earned Income Tax Credit (EITC) and may use the IRS EITC Assistant to determine eligibility. Within the framework of the FFCRA, there are also new IRS provisions for the self-employed and the sick leave and family leave tax credits in 2020, to which you may be entitled.
Teachers, counselors, administrators and other education professionals have seen the year 2020 change just about everything in the way they do their jobs. According to the IRS, eligible educators may be entitled to deductions up to $ 250 for expenses not reimbursed by their employer (or $ 500 for couples married to two educators making a joint declaration).
These expenses can include things like 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 disasters declared by the federal government such as a hurricane, forest fire, tornado or the like – of which there were many in 2020 – may be eligible for additional tax deductions.
Even taxpayers who choose to file with a standard deduction can reap the benefits of claim deductions by filing a Form 4684 to claim a “qualifying net disaster loss,” Kiplinger said. Detailed instructions regarding the new disaster tax deductions for 2020 can be found in IRS Publication 547.
With so much attention paid to the healthcare industry throughout 2020, it should be noted that the medical expenses you accrued in the past year for the diagnosis, treatment or prevention of illnesses could be eligible for a. tax deduction.
As noted by US News & World Report, taxpayers may be able to subtract eligible health care expenses their Adjusted Gross Income in Itemized Deductions (AGI), as long as your total unreimbursed expenses exceed 7.5% of your AGI.
Additionally, if you contributed to a Health Savings Account (HSA) last year, you may also qualify for an above-line tax deduction if you complete the IRS criteria for 2020.
Student loan deductions
Under the Biden administration, major changes are expected to occur where student loans are concerned, but we are not there yet. For 2020 tax purposes, some taxpayers may be eligible for deductions of up to $ 2,500 based on interest paid on student loans as a top deduction. The IRS Lists Student Loan Interest Deduction Criteria on their website, so you can check if you qualify.
Child tax credits
If you’re a parent, you’ve probably heard of the next one changes to the child tax credit as part of the American Rescue Plan, including potential monthly payments of up to $ 250 ($ 300 for children under 6) per child. While these payments are expected to start this summer and can be based on your 2019 or 2020 tax return, they will not impact your 2020 return.
If you adopted a child in 2020, you may be eligible for a maximum amount of $ 14,300 adoption credit via the IRS for qualifying expenses, depending on your income level.
If you’ve been fortunate enough to help others during their time 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 qualifying 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 qualifying charities as a top deduction. You can find out more about charitable donation deductions on the IRS website.