With the tax-filing season about to kick off, now's the time to start gathering your various forms and documentation. The IRS will begin accepting returns on Feb. 12. The sooner you get yours filed, the sooner you can expect your refund to hit your bank account or arrive in the mail.
In the course of filing your taxes, you'll want to capitalize on the different tax credits and deductions available to you. You may be planning to write off some of the expenses you incurred in the course of working from home last year. Not so fast -- unless you're self-employed, working remotely won't actually serve as a tax break for you at all.
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Don't count on that deduction
Workers who are self-employed and do their jobs from home can claim a number of valuable deductions that reduce their tax burden substantially. Specifically, those with a dedicated workspace can claim a home office deduction as well as write off the purchase of supplies and equipment needed to do their jobs. For example, a self-employed web developer can deduct the cost of a new laptop, monitor, or any other tool that relates directly to that work.
If you're a salaried employee, however, then all of those deductions are off the table, even if you worked from home for the majority of 2020. Prior to the Tax Cuts and Jobs Act of 2017, salaried workers could claim some work-from-home expenses thanks to the miscellaneous itemized deduction, but that deduction no longer exists. If you're not self-employed, you're out of luck.
Other tax breaks you can claim
While working remotely as a salaried employee won't give you access to the home office deduction or other write-offs that self-employed individuals are privy to, you can still lower your 2020 taxes in other ways. First, if you didn't max out your IRA contribution for 2020, you have until this year's April 15 filing deadline to sneak more money into your retirement plan. As long as you put that money into a traditional IRA, not a Roth, it will reduce the amount of wages the IRS can tax you on. For 2020, IRA contributions maxed out at $6,000 for savers under 50 and $7,000 for those 50 and over.
The same holds true if you have a health savings account (HSA). HSA contributions aren't due until April 15, so if you didn't max out last year, adding funds to your account will lower your tax bill. For 2020, HSA contributions maxed out at $3,550 for self-only coverage for workers under 50, and $7,100 for family coverage for workers under 50. For workers 50 and over, these limits were $4,550 and $8,100, respectively.
Depending on your circumstances, you might be entitled to other deductions, so it pays to either do some research or consult a tax professional to walk away with the most savings possible. While deducting expenses related to working from home may not be an option, you can still slash your tax bill in other ways.
