In the hot hazy days of summer the last thing many people are thinking about is taxes. However, the savvy taxpayers aren't waiting until next winter to find out which of last year's expenses might be able to be included in their itemized deductions. Instead, they know what is deductible and are gathering their documentation as they incur their expenses throughout the year. Most of us know that we now need a receipt for all cash contributions, regardless of amount and that medical expenses are deductible if they exceed 7 1/2% of adjusted gross income. But there are many other deductions that you may not be aware of. Some commonly overlooked itemized deductions that are deductible insofar as in total they exceed 2% of your adjusted gross income include the following:
Job Search Expenses
The costs associated with job hunting can actually reduce your taxable income. Costs that can be deducted include employment and outplacement agency fees, preparing and mailing copies of your résumé, and travel expenses for a trip, if the purpose of the trip is looking for a new job.
There are also restrictions on what jobs qualify. You cannot be a first time job seeker, the job must be in your most recent or current occupation, and if you are unemployed you cannot take a substantial break between your last job and looking for a new job. Like all deductions you should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence.
Union Dues and Expenses
Union dues, initiation fees and assessments for benefit payments to unemployed union members are deductible. However, you cannot deduct assessments or contributions that provide funds for payment of sick, accident, or death benefit. Contributions to a pension fund are not deductible.
Work-Related Education
It is not necessary to be enrolled in a degree program to deduct education expenses. If you meet one of the following requirements you can deduct tuition, books, supplies, laboratory fees, and certain transportation costs:
- If the education maintains or improves skills required in your current occupation or by your employer.
- If the law requires continuing education to keep your salary, status, or job.
Education undertaken to change your profession is not deductible.
Other Miscellaneous Itemized Deductions
Appraisal fees are deductible if they are to determine the value of a casualty loss or the fair market value of donated property.
Safety deposit box rental is deductible only if it is to store taxable income-producing stocks bonds, or investment-related papers and documents.
Some deductions that people attempt to claim are often misunderstood. The following are deductions that are trickier than they appear.
Work clothes and uniforms only have two requirements: the clothing must be a condition of your employment AND is not suitable for everyday wear. Although business attire is required to work in most professional offices it is suitable for everyday wear and therefore, not deductible. Protective clothing is deductible regardless if it can be worn everyday. Military uniforms are generally not deductible.
Contributions to political campaigns, judges, relief funds or lobbying groups are not tax deductible. The following fees are not deductible: adoption fees (there is a credit), fines and penalties, personal legal expenses, professional accreditation fees, and club dues. Personal disability and life insurance premiums are not deductible because the proceeds are not subject to income tax.
In regard to all of these deductions, it is always a good idea to consult a tax professional to evaluate your specific circumstance.
