WFH Deductions? Unemployment Benefits Taxable? Stocks, IRAs, and Donations? Answers to COVID-19 Tax Questions.

The COVID-19 pandemic has a far reaching impact. It’s no wonder that with everything going on there still remains some unanswered questions. Our team has organized a few answers to common questions regarding taxes, and how the CARES Act plays a role. Talk with your Lurie advisor for questions on your specific situations. 

Unfortunately, no. If you’re an employee who telecommutes, there are strict rules that govern whether you can deduct home office expenses. For 2018–2025 employee home office expenses aren’t deductible. (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.)

Be aware that these are the rules for employees. Business owners who work from home may qualify for home office deductions.

Yes. Unemployment compensation is taxable for federal tax purposes. This includes your child’s state unemployment benefits plus the temporary $600 per week from the federal government. It would be smart to have your child set aside 15-20% of all unemployment benefits for when tax season rolls around. That way there won’t be any unwelcoming surprises coming their way. If your child lives in Minnesota, the benefits will be taxed for state purposes as well.

It’s important to note that your child can have tax withheld from unemployment benefits or make estimated tax payments to the IRS.

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).

If, after the netting, 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.

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.

The 2020 Federal 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. States may have different deadlines for making any estimated payments.

The CARES Act allows for a $300 above-the-the line charitable deduction on 2020 returns for taxpayers that do not itemize. In addition, income-based limitations on deductions for donations of cash in 2020 to charitable organizations (other than certain private foundations and donor advised funds) has been lifted for 2020.

For 2019 returns, the Tax Cuts and Jobs Act (TCJA), signed into law in 2017, didn’t put new limits on or suspend the charitable deduction, like it did with many other itemized deductions. However, itemizing saves tax only if itemized deductions exceed the new, higher standard deduction. And if that’s the case, your charitable donations won’t save you tax.

You might, however, be able to preserve your charitable deduction by “bunching” donations into alternating years. This can allow you to exceed the standard deduction and claim a charitable deduction (and other itemized deductions) every other year. To be deductible on your 2019 return, a charitable gift must have been made by December 31, 2019. If you do meet the rules for itemizing, there are still other requirements. To be deductible, a donation must be made to a “qualified charity” — one that’s eligible to receive tax-deductible contributions. We can help you sort this out and explain the calculations.

We're Here to Help.

Even with the extended tax deadline, it remains important to understand your options while you can make planning decisions. At Lurie, we are here to help you navigate the new and existing legislation. While these are only some of the tax-related questions you may have related to COVID-19 we encourage you to contact us if you’d like further information on how these tax laws could be in your favor. 

Meet Our Team

Julie A Helms, CPA

Director, Specialty Tax Services

Julie has over 10 years of experience with fixed assets, specializing in cost segregation and expense vs. capital analyses. She has a unique approach and enjoys the complicated areas of the tax law where she can come up with creative solutions for her clients. Knowing the correct answer can look different for each client, Julie works with clients and their current systems and processes to find the best solution tailored for them. Julie has mastered the art of taking complicated tax concepts and translating them into understandable and implementable processes.

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