The Tax Cuts and Jobs Act that went into effect in 2018 dramatically overhauled which expenses are considered deductible for employees in Jamestown, ND. In most cases, tax filers are no longer allowed to claim unreimbursed business expenses as deductions on their taxes.
This means the vast majority of business expenses you would have been able to deduct before 2018 are no longer deductible. However, there are still some business-related expenses you can claim on your taxes in Jamestown, ND. Here’s a quick overview.
Full-time teachers in K-12 classrooms are still allowed to deduct up to $250 in out-of-pocket expenses for their classrooms. If both spouses are teachers and they are filing a joint tax return, the deduction can be up to $500.
Most deductible business expenses that remain are under the umbrella of self-employment expenses. Some of the most common self-employment deductions include:
- Qualified Business Income deduction, which allows self-employed taxpayers to deduct 20 percent of their income
- Half of Social Security and Medicare taxes paid are deductible as business expenses
- Retirement plans, including SIMPLE IRAs, SEP-IRAs and solo 401(k)s
- Office supplies, travel expenses, advertising expenses, mileage driven and other expenses in Jamestown, ND that most workers would have qualified for before 2018 are now accessible almost solely for self-employed taxpayers
Home office deductions
This is a particularly important deduction in the time of COVID-19, as more people than ever find themselves working primarily from home. There are home office deductions available, but not everyone will qualify for them.
The Tax Cuts and Jobs Act did put some limits on the home office deduction. If you are a W-2 employee, you will not benefit from this deduction, even if you work fully from home. Here again, the deduction is only available for self-employed individuals.
There are qualifications you must meet beyond being self-employed. The area you’re claiming to be your home office must be used “exclusively and regularly” as your primary place of business, and/or must be used as “a place where you meet or deal with patients, clients or customers” as part of your normal business operations.
If you are working out of your living room or dining room, or another room that serves multiple purposes, you will not be able to consider that entire room to be your home office, but may be able to deduct a portion for the room, so long as it is used exclusively for business purposes. The room does not need to be a separate room to be considered a home office space, but it does need to be “separately identifiable.” It could just be a desk in a corner of the room.
Beyond these deductions, you likely won’t have much luck with attempting to deduct any business expenses on your taxes. As mentioned previously, the Tax Cuts and Jobs Act eliminated a lot of the possibilities to deduct work expenses in favor of significantly increasing the standard deduction.
For more information about the deductions you qualify for, contact Craig S. Hanson, CPA, a local CPA serving Jamestown, ND for over 30 years.