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See if you qualify for any tax breaks for operating a business from your home. Is your home-based office a place of business?

A home office will qualify as the principal place of business if you use it exclusively and regularly to meet with clients or to conduct the administrative or management activities of your trade or business. There must be no other fixed location of the business where you can conduct these activities. Home office deductions cannot be more than your earned income. If they are higher, you may carry over the nondeductible expenses to the following year. Form 8829, Expenses for Business Use of Your Home, is used to claim a deduction for home office expenses for a self-employed person. The Tax Cuts and Jobs Act (TCJA) suspended the ability to deduct home office expenses for an employee beginning January 2018.

Do I qualify for home office tax deductions?

You may be entitled to a tax break if you are operating a business from your home. The following questions will help you determine whether you can deduct expenses incurred in connection with the business use of your home: Is this part of your home used regularly and exclusively in conjunction with your business or work?

  • Is this your primary place of business?

  • Is this where customers and clients meet with you?

  • Is this where you store product samples?

  • Is this where you administer or manage your trade or business?

If you answered yes to any of these questions, you may be able to deduct certain depreciation and operating expenses for the business use of your home. The same might apply if you use a separate structure (such as a shed), or store business-related supplies or inventory in an area of your home.

How does unemployment affect my taxes?

Unemployment benefits are generally taxable. Most states do not withhold taxes from unemployment benefits voluntarily, but you can request they withhold taxes. If you are receiving unemployment benefits, check with your state about voluntary withholding to help cover your income taxes when you file your tax return. Make sure you include the full amount of benefits received, and any withholdings, on your tax return.

Other factors you’ll need to consider:

I am collecting unemployment – will that impact my income tax?

  • Unemployment benefits are taxable.

  • Unemployment compensation is not considered “earned” income for the Earned Income Tax Credit (EITC), child care credit, and the Additional Child Tax Credit calculations and can reduce the amount of credits you may have traditionally received.

Will I owe taxes because of my unemployment compensation?

  • Generally, states don’t withhold taxes on unemployment benefits unless asked.

  • However, if you qualify for EITC, or the child tax credits, your taxes could be covered.

  • You can do a year-end tax check to see if you have enough credits and withholding to cover your taxes. You may still have time to make adjustments to lower your shortfall.

  • If you are still unemployed come 2021 tax time, you can set up a payment plan with the IRS or work out other delayed payment options.

  • The IRS assesses penalties on the balance owed when you file and when you pay late they also compound interest on the full bill daily. The IRS has programs that may forgive your tax penalties. If you qualify, this will also help reduce your interest and lower your overall tax bill.

  • Make sure you file your tax return on-time, even if you can’t pay. In the short-term, the penalties for filing late are higher than the penalties for paying late.

How do I deduct my job-hunting expenses?

  • Job-hunting expenses such as travel, cost of job placement companies, resume costs, etc. are no longer deductible.

  • Moving expenses are also no longer deductible unless you are active-duty military moving under military orders.

Are government benefits taxable?

  • Check with your local benefits offices; you may be eligible for state and federal benefits due to the change in your income. Benefits such as SNAP, housing subsidies, childcare subsidies, and many others are generally not taxable. Gifts from various organizations, such as local food pantries and utility and gas programs are usually tax-exempt.

Do I have to claim my severance pay on my tax return if I already paid taxes?

  • Severance pay is a lump-sum payment received from a company when you are terminated due to job closings, company reductions, or even company closures. These payments are typically based on time in service and/or job performance, and as such are taxable as wages. This payment will have the usually Social Security, Medicare, federal and state taxes withheld, which will be reflected on your W-2.

I lost my health insurance when I lost my job, do I have to pay a penalty?

  • The penalty for not having health insurance is $0 on the federal return for all taxpayers.

  • Certain states do penalize taxpayers who don’t have health insurance coverage and don’t meet an exemption.

*This content is for general informational purposes only and should not be construed as professional tax or financial advice for any specific individual tax situation. Taxpayers should always consult a qualified professional for individual guidance. This information constitutes a solicitation under the Treasury Department’s Circular 230. Most offices are independently owned and operated.

Changes to Job Search Deductions

While job search expenses are no longer deductible on the federal tax return, many states still allow some, or all, of your job-related expenses.

Active duty members of the Armed Forces are still eligible to deduct unreimbursed moving expenses. The move must be required under permanent change of station (PCS) orders and for moving household goods, family members (including pets), and one trip per family vehicle.

Be sure to include Forms 1099 and W-2s from all employers you had during the year on your tax return. If you worked in more than one state, make sure to file a tax return for each state.

Health Insurance Marketplace

The ACA also created state Health Insurance Marketplaces for taxpayers who do not have health insurance. The purpose of the marketplaces was to offer affordable insurance and allow lower-income taxpayers to estimate how much Premium Tax Credit the taxpayer will qualify for when they file their tax return and use that credit to offset their health insurance’s out-of-pocket cost. If you bought health insurance through a state or the federal marketplace, you must still wait for Form 1095A which reports your health insurance premiums and the amount of credit used already. Form 1095A is used to complete Form 8962, Premium Tax Credit, which is used to reconcile your advance payment of the credit on your federal return.

What is the Advanced Premium Tax Credit?

If you are not able to get affordable healthcare coverage through an employer that provides minimum value, you may qualify for The Advanced Premium Tax Credit (APTC). The credit helps low income individuals and families afford health insurance that is purchased through the Health Insurance Marketplace, also known as the Exchange. The credit can either be paid to your insurance company to reduce your monthly healthcare premium or you can take advantage of the benefit when you file your taxes at the end of the year. The credit is automatically paid to your insurance company, unless you choose to receive it as part of your tax return.

What are the eligibility requirements?

To qualify, you must not be eligible for healthcare coverage through either employer or government programs like Medicaid, Medicare, CHIP or TRICARE.

Is the credit refundable?

The Advanced Premium Tax Credit reduces the amount of taxes you owe. If your credit is greater than your tax bill then the remaining amount will be issued to you as a refund on your taxes. If you have no tax liability, you can receive the full amount of the credit as a refund.

*This content is for general informational purposes only and should not be construed as professional tax or financial advice for any specific individual tax situation. Taxpayers should always consult a qualified professional for individual guidance. This information constitutes a solicitation under the Treasury Department’s Circular 230. Most offices are independently owned and operated.

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