Tax cuts are a tricky thing. Several presidents, from JFK and Reagan to Bush and Trump, have issued historic tax reforms and been attacked for it from both sides of the political spectrum. The ultimate aim is to “starve the beast” and force federal spending to decrease by decreasing taxes collected from the people, and in this way, reduce the country’s deficit.
With that as the big picture, you can imagine how the chaos surrounding the pandemic has affected tax filing. Working from home means fewer tax deductions and reimbursed costs, since most of your expenditure is now happening at home, not at work. While you may not be able to deduct these expenses, you can still request your employer to reimburse you or provide a stipend to pay for the office-related supplies and expenses you need to do your work.
But if you’re self-employed, a freelancer, a consultant, or working gigs, you can claim the home office deduction, as long as:
The home office is your principal place of work and isn’t used for any other purpose
You use the rate of $5 per square foot of the portion of your house used for your business, upto 300 square feet in total.
Your house is used as a daycare facility either for children, the elderly, or for the physically/mentally impaired, and you either have a license or have been exempted from having certification to run the daycare under state law.
The expenses only include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, maintenance and repairs, and depreciation (i.e., you can’t include the $20 you paid your neighbor’s kid to mow your lawn).
Also, if you moved out of state during the pandemic in the middle of the tax year, don’t worry. Various tax laws and tax credits will be applied to keep you from having to pay tax twice, depending on which state you live in. If your state has “convenience” tax laws, you may face double taxation - these states include Askansas, Connecticut, Delaware, Nebraska, New York, and Pennsylvania. New Hampshire recently sued Massachusetts for unconstitutionally taxing workers who used to commute to Massachusetts for their jobs, even though they lived in New Hampshire and worked remotely due to the pandemic.
For more news, updates, and tax tips, visit Landmark Tax. Stay tuned for 2020 tax filing tips!
Comments