If we’ve learned anything from the Taylor/Kimye feud, it’s this — Save. Your. Receipts. (Okay that was lame, but hear me out.) Tax season is a ways away, but keeping up with your receipts now will save you a lot of time when it’s time to fill out those 1040’s. Obviously most of us won’t want to hang on to every single receipt we get (nor should we). So, it’s a good idea to develop a sense of which ones are actually important enough to file away, whether physically or electronically, to reduce the amount of taxes you’re paying on your income.
Below are some tax deductible expenses to keep in mind:
If you’re in the market for a new job, and you’ve spent some money on finding one, you might be able to recoup some of it (or, at the very least, decrease the amount of taxes you owe).
When I was looking for a job last year, I had to drive two hours just to get to my interviews. I made that trek on three separate occasions. Luckily for me, travel expenses related to the job search count as tax-deductibles. This includes things like the cost of gas (or car mileage), plane tickets, and hotel stays. Things that also count: costs pertaining to preparing and sending out your resume (mail and stamps), and also any “employment and outplacement agency fees.”
Unfortunately there are some caveats (boo!): if you’re searching for your first job, these expenses don’t count. Also, the job search must be for a job within your same “occupation” (i.e. field or industry), and there can’t be too much time between when your job ended and when you started looking for a new one. Read more here.
If you moved for a job and it was really, really far away, keep track of those receipts! So what counts as really, really far away? “Your new main job location must be at least 50 miles farther from your old home than your prior job location.”
Otherwise known as “Unreimbursed Employee Expenses.” Sometimes there are things that you just need to be a ~career~ man or woman, and you have to pay out of pocket for those things. The full list covered items is here, but I wanted to make a short list of the following because they seemed most applicable to the people I know (and most useful for TFD readers):
- Dues to professional societies
- Educator expenses
- Home office expenses
- Tools and supplies used in your work
- Subscriptions to professional journals and trade magazines related to your work
Obviously, the IRS frowns upon double-dipping. So if your employer already reimbursed you for the expense, you can’t deduct it! Read the full list here.
If you’ve already maxed out your American Opportunity Tax Credit and your Lifetime Learning Credit, you can deduct your career education costs as a job expense. It just needs to meet one of the following tests below:
1) “It maintains or improves skills required in your present work.”
So things like courses, seminars, or conferences that maintain or improve the skills that you need to do your job. And apparently, the IRS is fairly lax about what “maintains or improves a skill.”
2) “It is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer.”
If you have a professional license or certification that you need to renew (i.e. fork over money for) every year, that expense would fall under this category. Read the full text here.
And if you, like many Americans, are still paying back student loans, the interest you pay on your college loans might be tax-deductible.
This is an easy one. Generally, your loan lender will send you a form (the 1098-E) letting you know how much of your interest you can deduct. And, unlike the categories above, you just need to watch out for the form in the mail box. Check out the complete information here.
Of course, tax laws get into the nitty-gritty, so there are plenty of stipulations and monetary limits. But it’s worth looking into! So, whenever you’re feeling bored, just pick up the IRS 1040 manual for a leisurely read. (That’s a joke.) But for real, read it before attempting your tax return. These manuals are available in your public library, if you prefer the paper form; or, just look it up online and download it as a pdf.
Originally posted on The Financial Diet