Due to the COVID-19 pandemic, many corporate workers will be both home workers and driving for the foreseeable future. People had to navigate from home ̵
“We know there has been an increase in the number of people working from home due to the coronavirus,” said Lisa Greene-Lewis, CPA and tax expert at TurboTax last year. “In general, only self-employed people can take deductions for expenses related to working from home.”
Still, there are a handful of other work-related expenses that both business workers and the self-employed can qualify for claiming on their taxes. And it’s worth noting that tax laws change from year to year – and it’s entirely possible the IRS will reveal a host of new tax deductions related to COVID-19, and its impact on remote working, sometime between now and April next year. .
For now, here is a list of the labor costs and deductions you can currently claim.
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How to declare work expenses on your taxes: Choose a deductible item
Before you start going through each line item of each receipt, you may want to save yourself the trouble and figure out which one to take – the standard deduction or the itemized deduction.
Standard deduction: The standard deduction is an all-inclusive flat rate, without questions. For tax year 2020, the flat rate is $ 12,400 for single filers and spouses filing separately. The rate is $ 24,800 for married couples filing jointly. Following this route is much easier than listing it.
Itemized deduction: If you want to declare work expenses, medical payments, charitable contributions, or other expenses, use the itemized deduction. It takes more time than the standardized deduction – and you need proof of the expenses you want to deduct.
If you are going to declare and itemize your labor costs, you must complete Schedule A of Form 1040. You must have sufficient evidence for each itemized expense, which means tracking down the receipts. If your standard deduction is greater than the sum of your itemized deductions, save yourself the trouble and take the flat rate.
Community Tax Deductions to Claim
Before you start adding up all the line items, make sure you know what’s covered and what’s not. Here are some of the most common deductions for people who work from home.
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1. Home office deduction
Greene-Lewis says that while the home office deduction may be the biggest deduction for the self-employed, many are hesitant to take it. The most important requirement is that the space is reserved for and completely dedicated to your work.
“Can you deduct a home office if you work at your kitchen table?” she says. “Unfortunately, no. Not only do you have to be self-employed, but you also have a special space in your home that pertains solely to your business. You can’t deduct the space at your kitchen table if your family is eating there too.”
If you have a dedicated workspace at home, you can use the regular IRS method or the simplified option, but you can’t use a combination of these in one tax year. Some things that qualify for the home office deduction:
- Insurance: You can deduct a percentage from your home insurance that covers the business space in your home.
- Tools: Expenses for utilities, such as electricity and gas, can be deducted, but only the percentage used in your home office.
- Depreciation: If you own your home, you can deduct the cost of wear and tear from the portion that is used exclusively for business purposes.
All these calculations are based on the percentage of your home that you use for business. To find the percentage, compare the size of the space you use for business with that of your entire home, then apply the percentage to the specific expenses. For example, if your home is 1,800 square feet in total and your home office measures 300 square feet, your home office deductions can be applied at a rate of 16%.
Greene-Lewis says if you choose the simplified option, you can subtract $ 5 per square foot, up to 300 square feet, or $ 1,500 in total. This would be an alternative for calculating the different individual housing costs.
Regular commuting from your home to work is considered non-deductible personal expenses. However, if you need to commute between multiple locations or travel for work, some of those expenses may be deductible. Flights, hotel rooms, rental cars, meals and tips for service are all considered travel expenses. If you need a passport for your trip, you can claim that too.
In the past, the mileage you drove while driving your own car for business travel was an expense you could claim on your taxes, but the Tax Cuts and Jobs Act eliminated that for employees. Self-employed persons and entrepreneurs are eligible for this deduction.
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3. Work uniformly
If you need to buy clothes that you only wear for work, you can write off the cost. You can also declare costs for steaming or washing work clothes. The deduction does not exceed 2% of your adjusted gross income.
4. Continuing education and certifications
In some fields, you can claim the enrollment fee of any required courses, classes, or continuing education certifications. You can also deduct expenses and fees for professional organizations – as long as the organization is not political. And if you are a lawyer, you can deduct the price of the membership to your state bar or other similar organization.
If you’re a teacher, the teacher education deduction allows you to claim up to $ 250 in out-of-pocket expenses related to teaching materials. And Green-Lewis says that if you and your partner are both teachers, you can both claim the deduction.
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If you run your own business, you can deduct the cost of certain business supplies. And the deduction threshold is generous.
“Self-employed owners can deduct up to $ 1,020,000 for qualified business equipment such as computers, printers and office furniture,” Greene-Lewis says.