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    How Covid-19 has created new tax reduction opportunities

    On Behalf of | Feb 4, 2022 | Covid-19, IRS, Tax deductions

    The pandemic has changed the way we think about working, socializing, our health, education, child care, and now taxes.

    The pandemic has forced many businesses and their employees to eschew meeting together to work. This has meant a shift to working from home, increased “side gigs,” more virtual meetings and electronic transfer of information. It has also increased the opportunities for many of us to reduce our taxes. How?

    The ‘big three’ tax decrease opportunities

    While most of us who are employed full time have taken advantage of a health savings account, IRA and  flexible spending accounts at work, not all of us realize the new possibilities the pandemic has created. These include:

    1. If you have “side hustle” gigs you can deduct your vehicle mileage, any mailing or shipping costs and the cost for your advertising. You may hire a designer to do your website, or a writer to write your blog posts, or pay to host your website. These are all deductible. You can also write off a percentage of your home internet charges since you re doing all of your work from home now. What some people who do work on the side forget to write off are their professional membership fees and subscriptions. Check with your accountant or tax lawyer about writing off home office equipment including computers, desks, ergonomic chairs and even part of your home.
    2. If you are self employed, you can write off your self employment taxes. There is a 15.3% Federal Insurance Contributions Act (FICA) tax on all earnings. FICA is used to fund Social Security and Medicare programs. For those who are full time with a company, the employer pays half of this cost. However, if you are freelance or self-employed you pay the whole tax. You can deduct 50% of this amount from you income tax, no itemization required. It’s also worth combining your vacation travel with work travel as the airfare, a portion of your hotel and other various expenses can then be written off.
    3. If you want to learn, go back to school. There exists such an animal as the American opportunity tax credit (AOTC). This tax credit is directed to the first four years of college. It can mean a credit of $2,500 per student per year. The student can be you, your spouse, or your tax return listed dependent. It is a “credit” this means it is deducted from the taxes you owe the IRS. If the credit is greater than what you owe, you may get up to a $1,000 refund. The the lifetime learning credit is worth up to a yearly $2,000.

    Don’t forget the Earned Income Tax Credit (EITC) 

    This oft-overlooked credit ranged from $1,502 to $6,728 in 2021. What many people don’t realize is that you do not have to have children to qualify for this credit. Family size is a variable used to calculate the  EITC. The EITC income limits are $21,430 (single taxpayer, no children) to $57,414 (married couple, filing jointly, three or more children).

    Of course the best way to understand your options is to work with a tax professional who will offer information, insight and guidance on tax issues.

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