Life Events Series: How Your New Job May Save You Money at Tax Time
Many people don’t realize that the expenses that come with work can be tax deductible. However, your new job could actually save you money come tax time.
Job Hunting Costs
Did you start a new job in 2012? If so, you might be able to deduct the costs related to your job hunt. There are some rules, though:
- You can only take deductions if you were looking for a new job in the same field.
- You can’t take the job hunting deduction if you were looking for your first job.
- Your costs must exceed 2% of your AGI, and you can only deduct the amount over that 2%.
- There cannot have been a substantial break between when your old job ended, and you began looking for a new job.
If you meet those conditions, you can deduct the costs of career counseling, hiring a head hunter, resume help, cost of mailings and phone calls, and the cost of travel to go to job interviews. Remember, these are deductions from your income, when you itemize, and not a tax credit. What this means is that if you spend $500 for someone to review your resume, you don’t get $500 off your tax liability. You get $500 off as a deduction to the extent that all of these expenses exceed 2% of your AGI.
Other Unreimbursed Employee Costs
You can also take a tax deduction for costs related to your employment that you aren’t reimbursed for by your employer. This tax deduction is available whether you are an old job, in a new job, or starting your first job.
Some of the expenses that you might be able to deduct include:
- Depreciation on equipment, such as a cell phone or computer, that you bought in order to do your job.
- Dues to professional societies, unions, and chambers of commerce.
- Employment-related education costs
- The cost of obtaining licenses related to your profession.
- Travel costs related to a business trip, including passport fees.
- Tools and other supplies that you use for your work.
- The cost of uniforms, and how much you have to pay to keep them properly maintained.
- Subscriptions to trade magazines and professional journals in your field.
- Home office expenses, if you have a designated area exclusively related to work as you telecommute.
Once again, your ability to deduct expenses is subject to the 2% rule. So, if your AGI is $42,000, your costs need to be at least $840, and you can only deduct the amount above that number. So, if you spent $1,000 on employment related expenses, you can only deduct $160 from your income.
You can only claim expenses for which you were not reimbursed. If the company is paying for your cell phone, or if it covers your business travel expenses, you can’t deduct those. Anything the company pays for can’t be deducted from your taxes, it’s considered double dipping and is not permitted.
If you found yourself paying costs related to your new job, you might be able to reduce your tax liability to help offset some of your expenses to keep more money in your pocket.
TurboTax will figure out the employee deductions your eligible for based on your answers to simple questions.