Did you work from home in 2020? Don’t assume you’ll get a tax deduction
With the tax filing season about to begin, now is the time to start putting together your various forms and documents. The IRS will begin accepting returns on 12 February. The sooner you get yours, the sooner you can expect your refund to arrive in your bank account or arrive in the mail.
During your tax return, you will want to take advantage of the different tax credits and the deductions available to you. You may be considering writing off some of the expenses you incurred while working from home last year. Not so fast – unless you’re self-employed, working remotely isn’t going to get you tax relief at all.
Do not rely on this deduction
Self-employed people who do their work from home can benefit from a number of attractive deductions that significantly reduce their tax burden. Specifically, those with a dedicated workspace can claim a home office deduction and write off the purchase of supplies and equipment needed to do their job. For example, a freelance web developer may deduct the cost of a new laptop, monitor, or any other tool directly related to this job.
However, if you are a salaried employee, all of these deductions are excluded, even if you worked from home for most of 2020. Before the Tax Cuts and Employment Act 2017, salaried workers could claim work. home expenses thanks to the deduction on miscellaneous documents, but this deduction no longer exists. If you’re not self-employed, you’re out of luck.
Other tax breaks you can claim
While working remotely as a salaried employee doesn’t give you access to the home office deduction or other depreciation that self-employed workers have access to, there are other ways you can still lower your taxes in 2020. First, if you haven’t maximized your IRA contribution for 2020, you have until the April 15th filing deadline of this year to put more money into your fund. pension plan. As long as you put that money in a traditional IRA, and not a Roth, it will reduce the amount of wages the IRS can charge you. For 2020, IRA contributions capped at $ 6,000 for savers under 50 and $ 7,000 for those 50 and over.
The same goes if you have a health savings account (HSA). HSA contributions aren’t due until April 15, so if you didn’t hit the maximum last year, adding funds to your account will lower your tax bill. For 2020, HSA contributions capped at $ 3,550 for individual coverage for workers under 50 and $ 7,100 for family coverage for workers under 50. For workers aged 50 and over, these limits were $ 4,550 and $ 8,100, respectively.
Depending on your situation, you may be entitled to other deductions, so it is advantageous to do your research or consult a tax expert to leave with the most savings possible. While deducting work-from-home expenses is not an option, you can still lower your tax bill in other ways.