With the Coronavirus (COVID-19) still in full effect, many home and business owners are wondering whether or not the country-wide stimulus check they received last May will affect their 2020 tax returns. Well, we did our research and found answers to your pressing questions regarding your next tax filing session. Whether you are a dependent or are filing your own taxes, read below to get an idea of how your tax return will be affected in the spring of next year.
Will I Owe Any Taxes on My Stimulus Payment?
The first question we get at JLW Tax & Bookkeeping Services regarding the coronavirus stimulus check is “Am I going to have to pay taxes on this at the end of the year?”. Your EIP (Economic Impact Payment), otherwise known as the stimulus payment is not considered taxable income. In fact, it is not even considered income at all, so don’t worry – you will not have to pay taxes on your EIP during your next tax session.
However, if you claimed any of the unemployment benefits available during this time, these checks will be taxed as income, so don’t forget to check the amount that was withheld from your unemployment checks to see if that amount covers your tax obligation.
Is My Stimulus Payment Going to Put Me in The Next Tax Bracket?
Another great question we have been receiving from home and business owners are whether or not their stimulus check will force them into a higher tax bracket. For those of you that were on the edge of your current tax bracket at the end of 2019 and beginning of 2020, don’t worry! Due to your stimulus check not being classified as income, your $1,200 check will not push you into a different tax bracket.
However, if you were receiving an increased amount of income while on unemployment due to the Coronavirus, depending on how close you are in your tax bracket, may or may not push you into that next category. Ask your professional tax preparer at JLW Tax & Bookkeeping Services when it is time to file your 2020 taxes.
Will I Get Any Tax Credit When I File Next Year If I Received an Economic Impact Payment (EIP)?
The short answer is yes – and no. Your EIP, or stimulus check, is considered as your tax credit for your 2020 taxes. If you received an EIP and it was the full amount that you were already entitled to as a taxpayer for this year, then technically you are claiming the full amount of your tax credit early.
But, let’s say that you became a homeowner, started a business, or had a baby in 2020, then you would be eligible to claim whatever amount of your tax credit that is left over, subtracting the amount you received from your stimulus check. If you break even, then you will not receive an additional tax credit; if you still qualify for additional tax credit, then that will be awarded to you as normal once you’ve filed your 2020 taxes.
Can I Claim A Home Office Deduction Since I Am Working from Home?
This is another great question that unfortunately, is not what some owners may want to hear. We know that working from your bedroom or office is still work, however you will not be able to claim any home office purchases as deductions on your upcoming 2020 taxes.
Although you may have not had a choice in whether you wanted to work from home, due to The Tax Cuts and Jobs Act passed in 2017, unless you are an independent contractor or self-employed, these deductions are not allowed during the pandemic.
