17 Tax Breaks for Coronavirus

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Whether you’re out of work, spending extra money, or just nervous about coronavirus, you may be wondering what kind of tax breaks you can take advantage of. Here’s what you need to know.

Recovery Rebates

Recovery rebates are the $1,200 stimulus checks for most adults.

Medical Expense Deduction

The biggest tax deduction you’d be looking for coronavirus is the medical expense deduction. This would cover things like the cost of your care and the premiums you pay for health insurance.

If your medical expenses exceed 7.5% of your Adjusted Gross Income (AGI) during 2020, you can claim the amount as an itemized deduction when you file your 2020 taxes. Typically, your medical expenses would have to be over 10% of your AGI before you could deduct them. The Taxpayer Certainty and Disaster Tax Relief Act of 2019 extended the lower, 7.5%, threshold through 2020.

Health Insurance Premiums

Your health insurance premiums maintain their usual tax status. If you’re self-employed or pay employee premiums as a business owner, you can deduct that as a business expense. Employees already get to exclude the employer-paid portion of their health insurance from their premiums. Employees don’t get a deduction for the portion they pay unless it falls under the medical expense deduction.

Health Savings Accounts

If you’re eligible for a health savings account, you can pay your qualified medical expenses related to coronavirus from your HSA. Remember that you get a tax deduction for contributions to your HSA and can withdraw it tax-free to pay for qualified medical expenses.

If you’re not already using your HSA and using it to pay medical expenses, you can open one, deposit the money, and immediately spend it on qualified expenses to receive a tax deduction for that year.

Other Expenses

If you have other personal expenses, such as buying extra food for a quarantine, you probably won’t be able to deduct them. Only medical expenses are eligible for most of the above deductions.

If your business is spending extra money due to coronavirus, it should be deductible just like any other business expense.

Working from Home

Employees who work from home can no longer claim a home office deduction. If you’re self-employed, you can take a home office deduction under the usual rules.

Lost Income

There is no tax deduction for lost income. You just don’t pay taxes on that income and may fall under a lower tax bracket.

If you own a business and take a loss for the year, you may be able to use that loss to offset your profits on a prior or future year’s tax return.

Unemployment Benefits

If you lose your job to coronavirus and file for unemployment, any unemployment benefits you receive are generally taxable. The reason is that the benefits are a substitute for your taxable wages. If you receive benefits from a private unemployment fund you contributed to, you may be able to deduct the amount of your contributions from your taxable benefits.

Payroll Taxes

Employers can defer a portion of 2020 payroll taxes. Half must be paid by December 31st, 2021, and the other half must be paid by December 31st, 2022. This includes the employer share of self-employment taxes.

Investment Losses

If your investment portfolio drops because of the coronavirus market crash, you may be able to claim a capital loss or take advantage of tax loss harvesting.

Early Retirement Account Withdrawals

If you need to make an early retirement account withdrawal due to coronavirus, you may qualify for either normal tax/penalty exceptions or special rules for those impacted by coronavirus.

Suspension of Retirement Account Required Minimum Distributions

Congress has proposed (not yet passed) suspending RMDs for 2020. This prevents people from being forced to sell when the market is down. Otherwise, if you didn’t need the money and wanted to stay invested, you’d have to rebuy in a taxable account.

Extension of Time to Make IRA and HSA Contributions

You now have until July 15th to make 2019 IRA and HSA contributions. This gives you additional time to contribute a larger amount and maximize your 2019 deduction.

Charitable Contributions

You can take an above-the-line deduction for up to $300 in charitable donations. The AGI limit on donations is temporarily increased to 100% of AGI.

Self-Employment Tax Delay

50% of your 2020 employer portion of self-employment taxes is not due until December 31, 2021. The other 50% will be due December 31, 2022.

Other Deductions and Credits

If coronavirus causes you to lose income, you may become eligible for income-based deductions and credits that you may not normally be eligible for. These may include the following:

  • Traditional IRA deduction
  • Roth IRA eligibility
  • Premium Tax Credit (Obamacare subsidy)
  • Earned Income Tax Credit
  • Child Tax Credit
  • American Opportunity Tax Credit
  • Lifetime Learning Credit

Tax Extensions

There is no waiver of interest and penalties for past-due taxes from prior years.

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Have general questions about this post or want to learn more about a related topic? Please leave a comment at the bottom of the page. Comments are public, and I can’t provide individual advice, but it helps me make the posts more useful for the future. Please do not post personal information. If you need personal assistance, please contact the relevant government agency or hire an appropriate professional near you.

7 Comments on "17 Tax Breaks for Coronavirus"

  1. I filed my 2019 taxes after the corona credit was issued. My 2018 income was quite a bit higher so I didnt get the full 1200. If based on 2019 I qualify for the full amount since my income was very low. Now that the IRS has my 2019 taxes, is there a way for them to correct the amount i get— make up the difference so i get the full 1200? Is there a form I can submit to request corrected amount?

  2. bill josephson | April 17, 2020 at 11:21 pm | Reply

    These articles are terrible.
    How long will a normal person doing a tax return for 2018 not receiving an IRS rebate but instead making PAYMENT to the IRS have to wait for their $1200 check?
    If not getting rebates how will the IRS send the check?
    Why are people making annual payments to the IRS punished with slow rebate checks?
    Not reading anything about people who pay, not receive refunds, the IRS in April.

  3. Marvin J. Wiese | March 31, 2020 at 2:16 am | Reply

    Questions have come up as to what will happen next year (2021), when we file taxes for 2020. Will people lose credits (for children etc.) or have to pay back any of the stimulus money we receive this year?
    In other words, how will getting money this year (stimulus) affect us next year ? More taxes? Will it count as income?

    • This is a refundable tax credit that works just like any other tax credit. If you did your tax return without this credit next year and you owed exactly $0 and you were eligible for the $1,200 credit, you’d get a $1,200 tax refund. The only difference is you get the extra refund now instead of next April. The only thing you’d owe (or get extra money from) when you file 2020 is if your income goes above/below the cutoff or your number of qualifying children changed. https://forst.tax/why-do-coronavirus-stimulus-checks-depend-on-your-tax-return/

  4. Paid medical leave is working it’s way thru Congress and will be retroactive to reimbursement employers with tax credits for cost of extra wages.

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