With tax season upon us, many are wondering how their new work-from-home status might affect their 2020 tax returns.
Here are six of the most-asked COVID-related tax questions answered by tax professionals.
1. Do I qualify for the home office deduction?
You do qualify if you’re self-employed or an independent contractor. If you get a W-2 tax form from your employer, you don’t qualify.
2. Are there any new deductions I could be eligible for?
If you qualified for but didn’t receive either of the stimulus checks in 2020, you’re eligible for the Recovery Rebate Credit.
3. If I work from home in one state but my employer is in another, which state income taxes do I pay?
You typically only pay income taxes in the state you reside in. If you performed work in both states before moving to a remote setup, you need to pay income taxes in both.
4. I temporarily moved to a different state in 2020. How does this impact my taxes?
Even if your move was only temporary due to COVID-19, you may still owe taxes in that state too. The longer your stay, the more likely you have a tax obligation.
5. Do I need to pay taxes if I worked part-time and received unemployment benefits or compensation from a work-share program?
Yes, because compensation received from a work-share program or Pandemic Unemployment Assistance is taxable income.
6. Do I need to pay taxes on the stimulus check I received in 2020?
The stimulus check is not taxable income and won’t factor into your refund or any taxes you owe. You do still need to record it on your tax return.