Impact on Coronavirus with your 2020 Taxes
Are there any changes this year?
In a blink of an eye, the Coronavirus has made an impact on millions of people worldwide. The Covid-19 pandemic has completely changed our lives. Whether you are in America or any part of the world, the pandemic has affected you somehow in the areas such as financial, physical, emotional, or mental well being. Here in America, the government has reacted by providing funds and tax relief to individuals and businesses. Here is the impact on Coronavirus with your 2020 Taxes.
A Highlight of the tax impact for 2020
January 19, 2021
Stimulus Check
Income from stimulus payment is not counted as taxable income. If you did not receive the payment, you may be eligible to claim the Recovery Rebates Credit on your 2020 tax return.
Paycheck Protection Program (PPP) loan
If you received a loan under PPP program and it has been forgiven, it is excluded as an income for federal income tax purpose. Also, expenses funded with PPP loans are now tax deductible.
Unemployment benefit
For those who received help from the government under unemployment benefit, this income is treated as compensation and counted as taxable income. If you did not withhold any taxes from that income, you may have to pay additional taxes when filing your tax return.
Remote Working
Due to a stay home mandate, a lot of people are now working from home. This could get complicated if your work in one state but you live in another state. You may result in double taxation which depends on the rule of your domiciliary state.
Special Distribution from retirement plans and IRAs
Under the CARES Acts, the 10% penalty is waived for coronavirus-related distributions. There is no requirement that you have to spend on anything specific, as long as you have experienced adverse financial results from COVID-19. In addition, you have two choices to pay taxes either pay over three years or pay in full. You also have up to 3 years for repayment.
Charitable deduction
Under the Care Act, it allows for an above-the-line deduction of $300 for cash donation made in 2020 and 2021. For those who itemize, for 2020 and 2021 only, you can deduct up to 100% of your AGI for a cash donation.