Various job-related expenses can be taken as itemized deductions on Schedule A of the federal income tax return. Among these are unreimbursed employee expenses, tax preparation fees, and certain miscellaneous expenses.
Unfortunately, many employees disregard these deductions because either they prefer to file the short form or they are intimidated by the 2% limit of adjusted gross income. However, if you have sufficient medical expenses, taxes, mortgage interest, and charitable contributions to itemize deductions, you should take advantage of this additional tax benefit.
Unreimbursed Employee Expenses
Certain out-of-pocket job-related expenses that are not reimbursed by your employer may be deducted if they occurred during your tax year. Additionally, the expense must be ordinary, one that is common and acceptable in your trade, and necessary, one that is appropriate and helpful to your business. The expense does not have to be required to be considered necessary.
Among unreimbursed employee expenses are:
- Dues to professional societies if membership helps you do your job. One caveat: you cannot deduct dues to an organization if one of its main purposes is to (1) conduct entertainment activities for members or their guests, or (2) provide members or their guests with access to entertainment facilities.
- Union dues and expenses. Initiation fees and dues you pay for union membership are deductible.
- Subscriptions to professional journals and trade magazines related to your work
Work-related education if it meets at least one of the following two tests: (1) it maintains or improves skills required in your present work, or (2) it is required by your employer or the law to keep your salary, status, or job, and requirement serves a business purpose of your employer. If your education meets either of these tests, you can deduct expenses for tuition, books, supplies, laboratory fees and similar items, and certain transportation costs. - Travel to seminars. You can deduct expenses for travel, meals (50% limit on meals), and lodging if you travel overnight mainly to obtain qualifying work-related education. Another condition: you cannot deduct expenses for personal activities such as sightseeing, visiting, or entertaining.
- Depreciation on a computer or cell phone your employer requires you to use in your work
- Dues to a chamber of commerce if membership helps you do your job
- Job search expenses in your present occupation
- Home office or part of your home used regularly and exclusively in your work
- Legal fees related to your job
- Licenses and regulatory fees
- Medical examinations required by an employer
- Tools and supplies used in your work
- Travel, transportation, entertainment and gift expenses related to your work
- Work clothes and uniforms if required and not suitable for everyday use
Tax Preparation Fees
If you itemize deductions on your return, you can claim a deduction for the amount you paid to have your income tax return prepared. This includes the cost of tax preparation software, tax publications, and the electronic filing fee. Hiring an accountant to prepare your taxes would have the additional advantage of emphasizing other deductions that you might otherwise overlook.
Certain Miscellaneous Expenses
These expenses are limited to those related to producing or collecting taxable income and managing or protecting property held for earning income. Some examples include legal and accounting fees, clerical help and office rent, custodial fees (for trust account), your share of the investment expenses of a regulated investment company, certain losses on nonfederally insured deposits in an insolvent or bankrupt financial institution, and casualty and theft losses of property used in performing services as an employee.
2% Limitation
After you have collected all possible deductions in this category, compare the total to 2% of your adjusted gross income. The excess is the amount deductible.
Here is a hypothetical example to show how this works:
Adjusted gross income:$60,000
Professional Dues
IAEI $90.00
NFPA 150.00
IBEW 77.45
CEI Certification Renewals
2 x $50 100.00
Educational Expenses
Seminars 4 x $250 1000.00
Seminar Travel 4 x $60 240.00
Books
Codebook 67.50
Analysis 49.50
Ferms 45.00
1 & 2 Family 51.98 213.98
PowerPoint, 1 x $140 140.00
Total Deductions$2056.43
Minus two percent limit:$1200.00
Total Deductible$ 856.43
Of course, there are many more available deductions than these. It would be worthwhile for you to scan through Schedule A and its instructions. You will find these located athttp://www.irs.gov/pub/irs-pdf/i1040sa.pdf.
If you are a sole proprietor, scan Schedule C, which is located athttp://www.irs.gov/pub/irs-pdf/i1040sc.pdf. In a sole proprietorship, any expense incurred in the course of doing business is deductible.
If you think of your career spending in terms of what is deductible, you will discover that you are able to redirect your funds to allow you to do far more than you had expected.
This article is not legal advice nor intended to constitute legal aid. These tips are provided to give you general information about taxes. If you have specific questions, please consult a tax advisor or call the toll-free number for Federal Tax Information and Assistance at 1-800-829-1040.