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income tax

February 5, 2021 • By Kevin Alvarez

Your Top Tax Question About Working Remotely, Answered

Last spring, many of us were asked to leave the office and begin working remotely from home. If you were one of them, you know that presented a lot of issues to be solved as you juggled work and family, including children newly banished from their schools. It was a tumultuous time, and congratulations for dealing with it powerfully and creating solutions that worked for everyone. Whew!

Now, with tax time approaching, there are tax implications of working remotely that you need to address, and we are here to help. So, let’s take a look at the tax issues of remote employment.

What tax issues? I still pay tax on my income, right? Yes indeed. The income from your job will be reported to you on a W-2 in January, and you’ll report that income on your tax return. Nothing there has changed, at least for the federal tax return. But you may have special tax issues to deal with when you file your state income tax return unless you live and work in a state that has no income tax.

What’s different about state returns for remote employment? If you live in the same state in which your employer is located, state taxes are pretty straightforward. But when the pandemic hit and commuting to the office became a thing of the past, many people left urban areas and moved to the less-populated country where it was less expensive to live. If you crossed state lines to do that and now live in a different state from your former office, you may be dealing with the income tax rules of two states, not just one.

Oh no, do I owe taxes to both states? Good question – it depends. Most states look to your physical presence in determining whether to tax you. If that’s the case, if you live and work in one state for an employer in another state, you will only owe tax to the state in which you live and work. But each state is different, so be sure to use tax preparation software such as TurboTax® that considers the facts and circumstances of your employment situation in light of the tax laws of the states involved.

Can I deduct the costs of working from home, such as my computer, internet, office furniture, and supplies? Probably not. Unfortunately, the tax act passed at the end of 2018 axed those deductions for most employees, with the exception for teachers that allows them to deduct up to $250 for supplies used in the classroom. If you aren’t entitled to a deduction for your expenses, your best bet is to ask your employer to give you a non-taxable reimbursement for those costs.

When it's time to file your taxes, TurboTax® is here to help!

From simple to complex taxes, TurboTax has you covered. And when you need help, real experts are standing by — and can even do your taxes for you, start to finish with TurboTax Live®. Getting your biggest possible tax refund has never been easier. And as a SafeAmerica Credit Union member you can save up to $15 on TurboTax. Click below to get started today!

The information in this article is for general educational purposes only and not intended to provide specific advice or recommendations.Please discuss your particular circumstances with an appropriate professional before taking action.

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February 4, 2019 • By Lisa

Ten Great Ways to Spend an Income Tax Refund

Expecting a substantial income tax refund this year? If so, you are in the majority; over 80 percent of Americans get money back at the end of the tax year, with the average refund being close to $2,900. Rather than having those precious dollars being absorbed into your normal spending routine, get the most out of your cash.

  • Pay down high interest loans and lines of credit. With average annual interest rates for credit cards and personal loans hovering around fifteen percent, paying off that credit card before making other investment decisions makes good sense.
  • Fund Your Retirement Account. If you haven’t invested in a retirement account, seriously consider making a contribution to a retirement account right away.
  • Invest it. Instead of just working for money, let money work for you. If you invested one lump sum of $1,500 in the stock market, over thirty years, assuming a 12 percent return, you’d have $ 53,924! (Of course, do your research first before making any investment decisions and talk to licensed investment professionals)
  • Open an emergency account. Most Americans don’t have money set aside for those financial emergencies that always seem to happen when there is no cash in the coffer. A large tax refund is a great start for an emergency account. Experts recommend that it should eventually total between three to six months’ worth of essential living expenses.
  • Pay for repairs. Maintaining expensive possessions now will result in dollars saved tomorrow. Use the money to repair that leaky roof before it develops into a bigger problem; replace those dangerous bald tires with new, safe ones.
Woman paiting
  • Start a personal endowment. Investing in your emotional, physical, intellectual, and career growth is a wise use of money. Whether it’s paying for a gym membership or a cooking class, you’ll feel effects of this type of investment fast.
  • Make an extra home mortgage payment (or two). Though you won’t feel the benefit immediately, doubling up on a mortgage payment now can save you months of mortgage payments later.
  • Donate to a charity. Giving back to the community is a wonderful way of supporting a cause that you are passionate about. Even better – in many cases at least a portion of your donation is tax-deductible too.
  • Open a College Savings Plan for your child. A four-year, out-of-state college education can cost over $100,000. Save for your child’s college education with a college saving plan. For the most part, withdrawals are completely tax-free when used for higher education purposes. Talk to a licensed investment professional about your different options.
  • Plan a vacation. If you are in a fluid financial position, and can truly afford a bit of luxury, do something you’ve been dreaming of. Money is to be enjoyed as well as earned, saved, and invested. Go ahead. Book that cruise!

Although all the preceding ideas are excellent uses for a lump-sum amount of cash, remember that instead of planning for a refund, it could be more beneficial to come out even. A tax refund is an interest-free loan to the government, and money that is not in your pocket every month. If you have been getting a refund back each year, consider changing your withholding exemptions so less tax is withheld from each paycheck. While a tax refund may feel like a gift from Uncle Sam, it’s not—it’s money that you have overpaid on your income taxes. That said, some people use this as a form of saving.

 

*This publication is only intended to be used for general informational purposes. Consult a tax professional for the most current data and/or personal advice.

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