What and how much can be deducted from taxes for work from home in 2020
The COVD-19 pandemic forced millions of American workers to quickly switch to work from home (WFH) mode, but not all of them had an office in their home or apartment. Therefore, many people bought new chairs, tables and other office equipment out of pocket to accommodate the WFH organization. Is it possible to deduct these expenses in tax returns for 2020, the publication said Yahoo!
“The answer depends on the status,” said Lewis Taub, a certified public accountant and director of tax services for the New York office of Berkowitz Pollack Brant Advisors. "If they are employees who work for the company, or if they are self-employed."
Many companies allowed or even encouraged their employees to work from home during the pandemic, but any expenses they incurred to meet their obligations are not deducted from federal tax returns. There is also no deduction for any costs associated with the space in your home office, such as utilities or insurance.
This is because the Tax Cuts and Jobs Act, signed in late 2017 under the Donald Trump administration, made it impossible for employees to deduct from unreimbursed business expenses and home office.
Prior to that, employees could deduct unrecovered business expenses (along with other miscellaneous expenses, including home office expenses) if they were more than 2% of their unadjusted gross income. To receive the deduction, employees also had to break down their taxes by line item.
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Several states - Alabama, Arkansas, California, Hawaii, Minnesota, New York, and Pennsylvania - do offer a deduction for unreimbursed business expenses.
“But that can be very limited,” Taub said.
Workers should see if their companies can recoup these costs through an accountability plan set by the employer. Any refund is not considered taxable income for the employee, Taub said, and the company can deduct it for its own taxes.
Unlike company employees, self-employed workers have more options for deduction.
If you are a self-employed person, any expenses related to your business, such as paper, printers, computers, and other equipment, can be deducted as normal and necessary business expenses.
Self-employed people can also get a home office deduction if that person has a place that is used exclusively for business on a regular basis. It doesn’t have to be a separate room - the workplace can be in the corner of the room, but should be used solely for business purposes.
“It can't be a sofa where you meet clients at 14:00 pm and watch the evening news at 18:00 pm," Taub said.
As part of a home office deduction, you can write off some of your utility bills, taxes, insurance, and repairs. There are two ways to figure out how much to subtract:
- Simplified version: you can subtract $ 5 per square foot - up to 300 square feet - from the business portion of your home.
- The usual method: you determine the percentage of the area of your home that you use for business, and apply that percentage to an acceptable deduction.
For whom the home office deduction becomes fuzzy is for self-employed workers who had an office before the pandemic but who have been working from home since the outbreak of the coronavirus outbreak. The original location of the office could be considered the main location of the business, as long as it was not permanently closed, Taub said.
“If someone just doesn't want to go to the office, and they still have their own office to use, that won't work,” he said.
Many teachers across the country also worked from home, conducting classes remotely. To do this, they could buy the best laptop, lamps, microphone or headphones.
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A portion of the money spent can be deducted using the Faculty Expense Deduction. Eligible costs, according to the IRS, are amounts “paid for participation in continuing education courses, books, supplies, computer equipment (including associated software and services), other equipment and ancillary materials you use in the classroom.”
Qualified teachers can deduct up to $ 250 from unreimbursed business expenses. If both spouses are eligible and file a joint return, they can deduct up to $ 500, but not more than $ 250 each.
Eligible educators are kindergarten through grade 12 teachers, instructors, counselors, principals or assistants who have worked for a minimum of 900 hours per school year at a school that provides primary or secondary education.
However, you can consult a professional to make sure your expenses are up to par.
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