Of all the things I would like to write about, like the impending downgrade of U.S Treasuries, bond investing or IRA rollovers, Michelle Kim asked me to write an article about tips for filing your taxes. Michelle, I would rather count fire ants in my yard but here goes one for your insomnia. Since I’m not a Certified Public Account (CPA) and I don’t play one on T.V., I asked my long time friend and CPA Lorain Arnold to give me list of possible deductions. As Lorain points out, the list is only meant to give you ideas, or steer you in the right direction. They are not all-inclusive and not all items are deductible all the time. Many are subject to limitations, may only apply in certain situations or are governed by other rules. Please keep careful records and save your receipts for 3 years in case of audit.
Employees: Includes expenses for your job for which you weren’t reimbursed, but you only get the amount in excess of 2% of your AGI (adjusted gross income), and only if you can itemize. For instance, if your AGI is $100,000, you must have at least $2000 in employee business expenses before you will begin to benefit from the deduction.
Self-Employed: You are allowed to deduct most business expenses in full.
Advertising and Promotion Expenses (Self-employed)
Books and Publications
- Books, trade journals, newspapers and publications for your trade or profession
Dues and Fees
- Dues to a professional organization for people in your profession
- Union dues, initiation fees, and assessments for benefit payments to unemployed union members.
- Regulatory fees for your profession
- Dues to chambers of commerce and similar organizations if the membership helps you carry out your job duties (see exceptions).
- Licenses paid to state or local governments
- Educational expenses related to your present work that maintains or improves your skills.
- Research expenses
Equipment and Supplies
- Business use of computer. Employees: Must be for the convenience of your employer and required as a condition of your employment.
- Supplies and tools you use in your work
- Expenses for an office in your home IF part of the home is used regularly and exclusively for your work. Employees: the use of your home office must also be for the convenience of your employer.
- For more information, see IRS Publication 587
- Employees: Must be for the convenience of your employer and required as a condition of your employment.
Job hunting expenses (Employees)
- To deduct job hunting expenses, you must be looking for a job in your present line of work (i.e., you’re not changing professions or looking for your first job). Expenses include:
- Resume preparation (drafting, typing, printing, mailing, faxing)
- Employment agency fees
- Executive recruiters’ fees
- Portfolio preparation costs
- Career counseling to assist you in improving your position
- Legal and accounting fees you pay in connection with employment contract negotiations and preparation
- Transportation costs to job interviews
- Long distance calls to prospective employers
- Newspapers you purchase to read the employment ads
- Other business publications you purchase to read the employment ads
- Half of your meals you pay for that are directly related to your job search
- If you take a trip away from home to look for a new job, your expenses for traveling, lodging, meals (50% of the cost), etc. are deductible only if the primary purpose of your trip is to look for a job. To substantiate the purpose of your trip, keep a daily log of your interviews, application efforts, etc.
Meals and Entertainment
- Meals and Entertaining costs (only 50% of the cost is deductible). Keep a record of the date, place, amount of expenses, people present, business purpose, and business discussed. Also keep receipts for expenses in excess of $75.
- For more information, see IRS Publication 463
- Business use of cellular phone
- Cost of long-distance business calls charged to home phone
- Separate business telephone (home phone line is not deductible)
Travel and Transportation
- Traveling costs incurred while away from home on business
- Traveling costs paid in connection with a temporary work assignment
- Transportation between your home and a temporary work location if you have no regular place of work but you ordinarily work in the metropolitan area where you live and the temporary work location is outside that area
- Transportation between your home and a temporary work location if you have at least one regular workplace for this employment. It doesn’t matter how far away the temporary location is in this case.
- Transportation from one job to another if you work two places in one day
- If you are self-employed and your home is your principal place of business, all business travel is deductible.
- For more information, see IRS Publication 463
Uniforms and Gear
- Protective clothing and gear
- Uniforms (except if you’re full-time active duty in the armed forces)
- Dry cleaning costs for your uniforms or protective clothing (not for your everyday clothing, though)
- Specialized clothing designed for your job, as long as it's not suitable for everyday wear
- Safety equipment, such as hard hats, safety glasses, safety boots, and gloves
Andrew Brown is a Certified Financial PlannerTM and a Fee-Only Registered Investment Advisor. Lorain J. Arnold Jr. is a Certified Public Accountant with Arnold Gallivan Levesque P.C.