Some common job-related expenses tax deductible, yet go unclaimed
Job placement services. Uniforms. Continuing education. As millions celebrate Labor Day with a day off work, it’s also a good time to take stock of what it costs employees to perform and keep their jobs. H&R Block (NYSE: HRB) advises taxpayers to explore how job expenses can decrease tax liability.
“Many out-of-pocket costs associated with getting and keeping jobs are tax-deductible when specific guidelines are met,” said Kathy Pickering, executive director of The Tax Institute at H&R Block. “Even employees paid back a portion of an eligible expense may be able to claim the unreimbursed portion as a tax deduction. Also, some types of work-related deductions can be claimed by taxpayers who don’t itemize.”
Having the tools of the trade – job equipment expenses
Expenses for unreimbursed items necessary for working, such as computers, work tools, training that allows employees to keep their current positions, union dues and required uniforms may be eligible tax deductions. To be eligible, these items must be ordinary and necessary for the employee’s trade or business, not eligible for reimbursement, and then claimed as miscellaneous itemized tax deductions.
“While a business suit may be necessary for the job, it can be worn outside the workplace,” Pickering said. “However, a firefighter’s uniform is really a single-use item and therefore would be deductible.”
Spending money to make money – job-search expenses
In addition to the actual time investment that goes into a job search, the monetary costs can add up and be tax-deductible for some taxpayers. Among these expenses are résumé development, professional placement services and unreimbursed mileage. Generally, the job search must be in the taxpayer’s current line of work.
To be tax-deductible these expenses, along with all other miscellaneous itemized deductions, must exceed 2 percent of adjusted gross income; only the portion of job deductions and other miscellaneous itemized deductions that exceed 2 percent of adjusted gross income may be claimed. Unreimbursed airfare and hotel expenses for interview travel out of town may help some taxpayers meet this eligibility requirement. The primary purpose of the trip must be for the job search.
Moving on – relocation expenses for a new job
Between the ages of 18 and 44, baby boomers changed jobs an average of every 28 months.1 Changing jobs doesn’t always require moving to a new city, but when it does, some relocation expenses may be tax-deductible as above-the-line deductions, which means taxpayers don’t have to itemize to claim them. These expenses are generally those incurred moving self, family and belongings. Generally, these are the rules for deducting moving expenses:
- The new job must be at least 50 miles farther away than the old job was from the old residence
- Employees must work full time for at least 39 weeks within the first 12 months after relocating.
Some exceptions allow taxpayers to deduct these expenses if they lose their job for a reason other than willful misconduct. For those self-employed, the time requirement is doubled: must remain self-employed for at least 78 weeks within the first 24 months after moving.
Learning to stay in the game – education expenses
One way to stay competitive in the job market is to take advantage of continuing education opportunities. Among the tax breaks available for eligible working adults are the American Opportunity Credit for up to $2,500 for those in the first four years of college and Lifetime Learning Credit for up to $2,000 for those seeking to improve job skills or get a master’s degree. Those already repaying student loans can take a deduction for up to $2,500 in interest paid on those loans.
“Whether looking for work, moving for work or spending money to do your work, it’s important to understand the tax advantages available,” Pickering said.
Additionally, working parents, those looking for work and some full-time students who have a child under 13 may be eligible for the Child Care Credit up to $1,050 for one child and $2,100 for two or more children.
H&R Block is continuing to offer free Second Look® reviews to ensure taxpayers received the maximum refund possible. This offer is good at participating offices through Dec. 31 for the review of 2009, 2010 and 2011 income tax returns not prepared by H&R Block. New this year, taxpayers can get a Second Look from the comfort of their own homes with the secure, video conferencing tool Block LiveSM.
H&R Block, with 4,000 offices open year-round, At Home ® online and the all-new, face-to-face web solution Block LiveSM, offers taxpayers multiple options to meet their filing obligations. Taxpayers can call 800-HRBLOCK for more information or visit www.hrblock.com to find an office near them, start their return online or log in to Block Live.
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