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How to claim labor costs on your taxes


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The COVID-19 epidemic has had dramatic economic consequences for millions of Americans – driving redundancies and furloughs and turn many corporate employees into distant workers for the foreseeable future. At present, the most well-known employment-related tax deduction ̵

1; for home offices – is reserved for those who are both self-employed and have a special home space for work.

“We know that the number of people working from home has increased due to the coronavirus,” said Lisa Greene-Lewis, CPA and tax expert with TurboTax. “In general, only those who are self-employed can deduct costs related to working from home.”

Still, there are a handful of other work-related expenses that both self-employed and self-employed people may be entitled to claim on their taxes. And it’s worth noting that tax rules change from year to year – and it’s very possible that the IRS will reveal a host of new tax deductions related to COVID-19, and its impact on telework, sometime between now and next April.

Currently, here is a list of labor costs and deductions that you can currently claim.

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How to apply for labor costs on your taxes: Choose a deduction

Before you start going through each line of each receipt, you may want to save yourself the hassle and find out what you are taking: the standard deduction or the specified deduction.

Standard deduction: The standard deduction is a comprehensive standard amount, no questions asked. For the fiscal year 2020, the standard amount is $ 12,400 for singles and those who file separately. The price is $ 24,800 to get married together. Taking this route is much easier than specifying.

Specified deduction: If you want to claim labor costs, medical payments, charity fees or other expenses, use the specified deduction. It is more time consuming than the standardized deduction – and you need proof of the expenses you want to deduct.

To claim and specify your labor costs, you must complete Form A on Form 1040. You must have sufficient proof of each specified cost, which means tracking receipts. If your standard deduction is greater than the sum of your specified deductions, save yourself the hassle and take the standard amount.

Common tax deductions to claim

Before you start adding all the lines, make sure you know what is covered and what is not. Here are some of the most common deductions for people working from home.

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1. Deduction for home office

Greene-Lewis says that although the home office deduction may be the largest deduction for self-employed people, many hesitate to take it. The most important requirement is that the space is reserved for and completely dedicated to your work.

“Can you pull off a home office if you work at your kitchen table?”, She says. “Unfortunately no. You must not only be self-employed – but have a dedicated space in your home that is exclusively related to your business. You can not deduct the space at your kitchen table if your family also eats dinner there.”

If you have a special workspace at home, you can use the IRS method or the simplified option, but you cannot use a combination of them in a single tax year. Some things that qualify for a home office deduction:

  • Insurance: You can deduct a percentage of your home insurance that covers the business area of ​​your home.
  • Tool: Costs for tools, 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 on the part that is only used for business.

All of these calculations are based on the percentage of your home that you use for business. To find the percentage, you can compare the size of the space you use for business with your entire home and then use the percentage for the specific expenses. For example, if your home is a total of 1,800 square meters and your home office measures 300 square meters, your home office deduction can be applied at a rate of 16%.

Greene-Lewis says that if you take the simplified option, you can deduct $ 5 per square foot, up to 300 square feet, or a total of $ 1,500. This would be an option to calculate the various individual housing costs.

2. Travel

Regular commutes from your home to work are considered non-deductible personal expenses. However, if you have to commute between several places or travel on the job, some of these costs may be deductible. Flights, hotel rooms, rental cars, meals and service tips are considered travel expenses. If a passport is required for your trip, you can also claim it.

In the past, mileage achieved when driving your own car for business travel was a cost you could claim on your taxes – but the tax breaks and the work law eliminated it for employees. However, self-employed persons and entrepreneurs are still entitled to this deduction.

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3. Work uniform

If you have to buy clothes that you only wear at work, you can write off the cost. You can also claim expenses for dry cleaning or washing work clothes. The deduction may not exceed 2% of your adjusted gross income.

Continuation and certification

In some fields, you can claim the enrollment fee for all required continuing education courses, classes, or certifications. You can also deduct professional organization fees and charges – as long as the organization is not political. And if you are a lawyer, you can deduct the membership fee for your prime minister or any other similar organization.

If you are a teacher, the teacher education deduction allows you to claim up to $ 250 in deductibles related to teaching materials. And Green-Lewis says that if you and your partner are both teachers, you can both claim the deduction.

Read more: The truth about paying taxes on unemployment checks

5. Accessories

If you own your own business, you can deduct the cost of certain business deliveries. And the deduction threshold is generous.

“Self-employed people can deduct up to $ 1,020,000 for qualified business equipment such as computers, printers and office furniture,” says Greene-Lewis.

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