If you are an employee and spend your own money on business travel, or are presently searching for work, you may be able to deduct work-related expenses on your taxes. These expenditures can add up greatly over time, but by being aware of which expenses provide tax advantages, you can greatly offset their cost. Knowing which expenses you can deduct under what circumstances can help maximize your refund or reduce the amount of tax you owe.
Here are several primary forms of job-related and job search expenses you may be eligible to deduct on your return. Keep in mind that most of these will be subject to a 2% adjusted gross income (AGI) limit. In other words, if you are an employee, you will claim most of these work-related deduction as miscellaneous itemized deductions on Schedule A, and you can only deduct the amount of all such expenses that exceed 2% of your AGI.
Tax Deductible Work Expenses
1. Driving Expenses
If you use your own vehicle for work purposes, you may be eligible to get a deduction for travel- and car-related expenses. You have the option to deduct your actual expenses, such as the costs to drive and maintain the car, including the costs of gas, oil, maintenance, registration, licenses, and insurance. Or, you can choose to deduct expenses based on a standard mileage rate. Check Tax Topic 510 at the IRS website to see which method you’re eligible to use.
For example, if you are a pizza delivery driver and use the standard mileage deduction, you should keep track of how many miles you drive while making deliveries, but not any miles you drive from your home to the pizza shop to start your shift. Simply record your mileage when you leave with your first delivery, and then write down your car’s mileage when you finish your final delivery. Maintain this log every day you work and save it for tax purposes. Plus, if you go directly from one job to a second job, you can also take a tax deduction on these miles as well.
For the 2014 tax year, the standard mileage deduction is 56 cents per mile. If you choose the actual expense approach, you won’t use the standard mileage deduction and will want to hold onto receipts for all related expenses. For most people, it’s easiest to keep track of mileage. But even if you use the standard mileage deduction, you can still additionally deduct tolls and parking expenses.
2. Educational & Licensing Expenses
Are you taking a class to improve your skills at your current job? This can be great for your career and, unless you’re part of an employer tuition reimbursement program, it is deductible to boot. However, if you’re taking classes to qualify for a new job or make yourself more marketable in the job market, you cannot deduct the expenses. But if those classes were taken at an accredited college or university, you may be able to deduct tuition and fees as a non-job-related educational expense (which is not subject to the 2% AGI limit). Also, if you’re required to hold any licenses for your job, you can deduct the license fees. Dues paid to professional societies and subscriptions to trade publications relevant to your line of work are also deductible.
3. Job-Seeking Expenses
Typical deductible expenses incurred during a job search include employment agency fees, stamps and printer paper for resumes, transportation to job interviews, telephone expenses, and fees for a pre-employment physical. Furthermore, you can deduct these expenses even if you don’t find a job during the tax year for which you are filing. However, these are not deductible if you’re looking for your first job, are trying to switch fields, or if there was a “substantial break” (according to IRS publication 529) between the time your last job ended and you began looking for a new one.
4. Tools, Uniforms & Safety Equipment
If you’re required to purchase and wear a uniform that is not “adaptable to general wear” (in other words, it is unsuitable for wear outside of work), you can deduct this expense. Cleaning and repairing your uniform are also deductible expenses, as are purchases of safety equipment, such as hard hats, special shoes, safety glasses, and other protective gear. The cost of any smaller tools or supplies that you are required to use for your job are also deductible.
Deducting Job-Related Expenses
Job-related tax deductions fall under the “miscellaneous” category, and if you receive a W-2, you can only deduct the amount of your job-related and other miscellaneous expenses that exceed 2% of your adjusted gross income (AGI). However, if you receive 1099 income, you can generally deduct all job-related expenses as business expenses on Schedule C, and not be subject to the 2% AGI limit.
While tax time may sting no matter what, you may be able to reduce your burden greatly by being shrewd when filing – and by keeping diligent track of your mileage and other expenses all year long. Put in the effort and see just how much you can save.
Which job-related expenses are you deducting on your taxes this year?