The world was turned upside down by the novel coronavirus pandemic in March 2020, and that included the way people work. While many across the country were furloughed or laid off, many others began to work from home. Now a year later as tax season is coming due—the deadline is May 17—some are asking how this may impact the taxes you pay.
One question raised is whether employees who were sent home and took part in telework or telecommuting could take any deductions for the space they used or even the equipment they purchased. In most cases, the home office deduction for salaried workers is a thing of the past, and employees forced to work from home are not able to claim the home office as a deduction.
The Internal Revenue Service (IRS) is very direct when it comes to the home office, and who may qualify.
According to the IRS, “Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.” Even for those who only work from home, a home office must be a space dedicated solely to work—hence it can't be the dining room table.
Even “employee business expenses” have changed as the result of the Trump-era tax reform.
However, workers who bought a computer specifically for work—and that means work only—“Under Internal Revenue Code section 179, you can expense the acquisition cost of the computer if the computer is qualifying property under section 179, by electing to recover all or part of the cost up to a dollar limit, by deducting the cost in the year you place the computer in service.”
New Tax Credits
However, because of the pandemic, there are other credits that filers can still take advantage of, and this includes the Earned Tax Credit, which was included as part of the Covid-related Tax Relief Act of 2020. It allowed taxpayers to elect to use their 2019 earned income to figure the credit if their 2018 earned income is greater than their 2020 earned income.
“The Earned Income Tax Credit (EITC) helps low- to moderate-income workers and families get a tax break. If you qualify, you can use the credit to reduce the taxes you owe—and maybe increase your refund,” the IRS explained. “You may claim the EITC if your income is low- to moderate. The amount of your credit may change if you have children, dependents, are disabled or meet other criteria.”
Additionally, the 2018 Tax Cuts and Jobs Act changed the threshold for itemized medical expense deductions to 7.5 percent of adjusted gross income, while the threshold was scheduled to increase to 10 percent of AGI for 2021 and beyond. The provision became permanent under the CARES (Coronavirus Aid, Relief, and, Economic Security) Act, but it does require that you itemize on your return. The standard deduction for 2020 is $12,400 for singles and $24,800 for married couples who file jointly.
If you helped others during the pandemic, you may be rewarded with new deductions.
For 2020, individuals who don't itemize deductions can still claim a federal income tax write-off for up to $300 of contributions to IRS-approved charities—and the limit applies to both unmarried taxpayers and married joint-filing couples. Under the new tax code, the deduction is doubled to $600 for married joint-filing couples for contributions made in 2021, so give and you shall receive (a tax credit) this year.
Likewise, the CARES Act suspended the limit on itemized charitable deductions—to 60 percent of your adjusted gross income. That has been suspended into 2021.
Peter Suciu is a Michigan-based writer who has contributed to more than four dozen magazines, newspapers, and websites. He regularly writes about military small arms and is the author of several books on military headgear, including A Gallery of Military Headdress, which is available on Amazon.com.