Tax Tips: Everything You Want To Know For The 2020 Tax Season
You could say that the year 2020 was like a bull in a China
shop. Businesses were forced to close, parents became teachers to their now
"homeschooled" children, and working from home became the new norm. But what
does all of this have to do with your taxes? Depending on your particular
situation, there might be certain questions you need answered, from tax
implications on working from home, stimulus payments, and even ways to boost
your tax refund.
Tax Issues of Remote Employment:
though I work from home, do I still pay taxes on my income? Yes! The income from your
job will be reported to you on a W-2 in January, and you'll report that income
on your tax return. Nothing there has changed, at least for the federal tax
return. But you may have special tax issues to deal with when you file your
state income tax return unless you live and work in a state that has no income
Can I deduct the costs of working from home, such as my computer,
internet, office furniture, and supplies? Unfortunately
not. The tax act passed at the end of 2018 axed those deductions for most
employees, with the exception for teachers that allows them to deduct up to
$250 for supplies used in the classroom. If you aren't entitled to a deduction
for your expenses, your best bet is to ask your employer to give you a
non-taxable reimbursement for those costs.
How the Stimulus Payments Impact My Taxes:
Do I owe tax on the money I received? Nope! The stimulus
payment was designed to impact the economy, not your taxes, so it won't reduce
your 2020 refund or increase your tax due.
I didn't get a payment - why? If your income for 2019 or 2018 was
over $75,000 ($150,000 if you filed jointly, $112,500 if you were head of
household), then your payment was reduced by $5 for every excess $100 you
earned. And if you didn't file a tax return for either year, you may not
have gotten a payment.
Really? What can I do now? If you were supposed to file a 2019 tax
return and didn't, file right away. If your income was too low to file, at
IRS.gov you can click on the tab marked "Non-filers" and fill in your basic
information. If the IRS determines you are eligible for a payment, they will
send it to you.
What if my income has gone down? If your 2019 income was too high
for you to receive a payment, but your income this year is much lower, you are
in luck. You can claim your stimulus payment on your 2020 income tax return,
and it increase the refund you receive (or reduce any tax due).
My 2020 income is higher than in 2019 - will the government want the money
back? No. If you received a stimulus payment based on lower income in
2019, that payment is yours to keep even if your income increased above the
threshold in 2020.
How Can I Boost My Tax Refund?
Itemize your deductions. The standard deduction is $12,400, so it's tempting to claim
it rather than tracking down receipts and tax forms so you can itemize your
deductions. But itemizing might be worth it if you are a homeowner with a
sizeable mortgage, gave money and "stuff" to charity, or paid points when you
took out your mortgage. If you are an educator, you can deduct up to $250 of
school supplies even if you don't itemize deductions.
Claim credit for your "full house". If your adult children, their significant
others or other family have come to live with you during the pandemic, you may
be eligible to claim a $500 tax credit for non-child dependents you support if
their income is less than $4,300. You can claim the credit for parents you
support, even if they don't live with you.
Claim education expenses. If you are paying college expenses for yourself, your spouse
or a child, two education credits can help defray those costs, the American
Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). The AOTC
is a partly reimbursable credit for 100% of the first $2,000 of education
expenses you pay and 25% of the next $2,000. The Lifetime Learning credit (LLC)
is 20% of the first $10,000 of education expenses. The AOTC is eliminated once
your income exceeds $90,000 and the LLC at $68,000. There are other differences
as well, so weigh your options carefully in deciding which credit to claim.
Start gathering the data you'll need to claim the deduction, and consider
prepaying tuition or other costs to get the maximum credit possible.
Contribute to tax-deductible retirement accounts. This is a way to save for your future and
boost your tax refund. If your income is under $65,000, you may qualify for a Saver's
Tax Credit as well. That's three different benefits from the same action. Make
contributions to your 401(k) by the end of the year. Though you have until the
tax filing deadline to contribute to an IRA, if you are claiming the Saver's
Tax Credit, do that by year end as well.
now, Telhio Credit Union has teamed up with Turbo Tax to offer its
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