Answers to Common COVID-19 Related Tax Questions
The Coronavirus (COVID-19) pandemic has impacted many individuals’ finances across the country. Here are some answers to common tax questions you may have right now.
My employer closed the office and I’m working from home. Can I deduct any of the related expenses?
No, if you’re an employee who telecommutes, there are strict rules that govern whether you can deduct home office expenses. Employee home office expenses aren’t deductible for 2018–2025. Starting in 2026, an employee may deduct home office expenses, within limits, if the office is for the convenience of his or her employer and certain requirements are met.
These rules apply to employees. Business owners who work from home may qualify for home office deductions.
My son was laid off from his job and is receiving unemployment benefits. Are they taxable?
Yes, unemployment compensation is taxable for federal tax purposes. This includes your son’s state unemployment benefits plus the temporary $600 per week from the federal government. Depending on the state he lives in, his benefits may be taxed for state tax purposes as well.
Your son can have tax withheld from unemployment benefits or make estimated tax payments to the IRS.
The value of my stock portfolio is currently down. Can I deduct the loss on my 2020 tax return if I sell a losing stock now?
It depends. Let’s say you sell a losing stock this year, but earlier this year, you sold stock shares at a gain. You have both a capital loss and a capital gain. Your capital gains and losses for the year must be netted against one another in a specific order, based on whether they’re short-term (held one year or less) or long-term (held for more than one year).
After the netting, if you have short-term or long-term losses (or both), you can use them to offset up to $3,000 ordinary income ($1,500 for married taxpayers filing separately). Any loss in excess of this limit is carried forward to later years, until all of it is either offset against capital gains or deducted against ordinary income in those years, subject to the $3,000 limit.
Since the tax filing deadline has been extended until July 15 this year, do I have more time to contribute to my IRA?
Yes, you have until July 15 to contribute to an IRA for 2019. If you’re eligible, you can contribute up to $6,000 to an IRA, plus an extra $1,000 “catch-up” amount if you were age 50 or older on December 31, 2019.
What about making estimated payments for 2020?
The 2020 estimated tax payment deadlines for the first quarter (due April 15) and the second quarter (due June 15) have been extended until July 15, 2020.
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