You don’t have to own a business to deduct costs related to your job. It’s also possible, in some cases, to deduct the unreimbursed expenses you incur as part of doing your job. Realize, though, that the IRS has rules regarding your tax deductions. You can’t just deduct whatever expenses you want, and you have to meet certain requirements if you want to deduct your job expenses from your income.
What Expenses are Tax Deductible?
In general, any expense that is required for your job, but your employer doesn’t reimburse you for, is tax deductible. Here are some of the guidelines for tax deductible expenses:
- “Ordinary and necessary” for someone in your line of work.
- Incurred so that you can carry our your work.
- You aren’t reimbursed in any way for the cost.
- You itemize your deductions using Schedule A.
In addition to these requirements, you can only deduct your job expenses if they add up to more than 2% of your adjusted gross income (AGI). You’ll only be able to deduct the amount that goes beyond that 2% of AGI. So, if your AGI is $45,000 a year, you need to pay more than $900 in business expenses to deduct. And if you paid $1,200, only $300 of it is tax deductible.
Some of the job-related expenses you can deduct include:
- Legal fees, as well as the licenses and other fees that you pay for certifications. If you are required to take classes to retain employment, you can deduct the cost of that training and education.
- If you are required to purchase technology for your job, you can deduct the depreciation. It’s also possible to deduct the costs of a home office, if it is used exclusively for work.
- You can also deduct the cost of dues that you pay to unions, local trade groups, or professional organizations. Subscriptions to professional and trade publications can also be deducted.
- Workers who are required to purchase their own uniforms, or purchase certain work clothes in order to retain employment, can deduct those costs. It might also be possible in some cases to deduct the costs of upkeep. However, it’s important to note that the purchase of clothes that you wear to other places in addition to work aren’t tax deductible. You have to be specifically required to purchase certain items for work in order to take the tax deduction.
- Unreimbursed travel costs can also be deducted come tax time. If you have to go on a business trip, and take your own car, you can deduct the mileage. It’s also possible to deduct the cost of airfare, hotels, rentals, cab fares, and other costs, if the company doesn’t reimburse you. Note, though, that your commute is not tax deductible, no matter how long it is.
- Even some costs related to entertaining business contacts might be tax deductible.
Keep Good Records
If you plan to take advantage of tax deductions for job costs, make sure that you keep good records. Save your receipts, and count them up at the end of the year. If you plan to deduct a portion of the cost of a meal you bought for a client, make sure you write down information related to the meeting, including who the client is, and what you discussed. If you are audited, you will want this information readily available in order to back up your case.
When in doubt, consult with a knowledgeable tax professional. The right tax professional can help you determine which expenses are truly tax deductible, and which are a bit of a stretch.
If you are required to spend money in order to keep your job, you can deduct those costs. Keep track of eligible expenses, and then tally them at the end of the year. If your expenses amount to more than 2% of your AGI, you might be able to deduct the costs from your income for tax purposes. The deduction might seem small, but every little bit helps.
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