Every year, some people overpay their income taxes due to forgotten expenses or overlooked deductions that could lower their tax liability. Do not let this happen to you.
Jackson Hewitt Tax Service is in the business of saving you money. If you have un-reimbursed business expenses in the following areas, you might be able to save some dollars if you:
- Use your vehicle for business purposes
- Travel on business
- Entertain a business associate, Have job-related expenses, Have education expenses related to your work, Are looking for a job in your same field, Moved because of a new job, Have educator expenses, Work from your home, Made purchases for your business
Be sure to maintain records and keep your receipts for all your allowable expenses.
Using Your Vehicle for Business
When you use a personal vehicle for business, you may deduct the business-related mileage expense by using either the standard mileage rate or the actual expenses of maintaining the vehicle. The 2014 standard mileage rate is 56 cents per mile.
If you take the actual expenses, you can deduct the depreciation, gas, oil, insurance, tires, licenses, repairs, etc. Make sure you keep written records of all of your expenses and your total miles and business miles for the year. If you choose to take actual expenses, you cannot change to the standard mileage deduction method. The cost of commuting between your home and your work is not deductible.
For more information on deducting job-related vehicle expenses, click here.
You may be able to deduct business travel expenses if you must conduct business away from your tax home and your employer does not offer reimbursement for these expenses. If your employer does offer reimbursement for these expenses, but you choose not to be reimbursed, you cannot deduct those business expenses. The cost of un-reimbursed transportation, lodging, laundry, dry cleaning, and telephone expenses are some of the deductible expenses. Generally, meals are only 50% deductible; however, for certain individuals in the transportation industry such as interstate truck drivers or airline pilots, the deductible percentage is generally 80%. Out-of-town convention expenses can also be deducted if not paid for by your company, so save receipts for your lodging and meals. If the convention was in town your mileage to and from the convention location may be deductible.
For more information on deducting job-related travel expenses, click here.
If you incur entertaining costs for business reasons, you may be able to deduct 50% of the amount. The expense must be considered ordinary or necessary to your profession.
Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation.
Be sure to keep a record of the business purpose and a receipt.
Office supplies, postage, business cards, and long distance charges incurred for your job that are not reimbursed are deductible.
The uniform your company requires you to wear may also be a deduction. If the uniform is not suitable for everyday wear, the cost of the uniform and the upkeep may be deductible.
Your professional library can also be a source of tax deductions. Books, magazines, and journals related to your field can be deducted. Some other expenses that may be deducted include union dues, insurance, and professional licensing fees.
If you are an employee, you may be able to deduct work-related education expenses on your income tax return or exclude your employer-provided educational assistance benefits from your income.
Qualifying work-related education must either be education that is required by your employer or the law to keep your present salary, status, or job, or be education that maintains or improves skills needed in your present work. However, qualifying work-related education cannot be education that is needed to meet the minimum educational requirements of your present trade or business, or be education that is part of a program of study that will qualify you for a new trade or business.
You may be able to deduct these work-related educational expenses as an itemized deduction. You should review the requirements for qualification, compare the tax benefits each option provides, and determine which combination gives you the lowest tax liability.
One of the advantages of deducting work-related education expenses as an itemized deduction is that you can deduct not only the qualified tuition, books, supplies, lab fees, and similar items, but also incidental expenses (such as certain transportation and travel costs) and other educational expenses (such as costs of research and typing when writing a paper as part of an educational program). You may also be able to deduct local transportation costs of going directly from work to school. If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning home from school. You can deduct expenses for travel, meals (usually limited to 50%), and lodging if you must travel overnight to obtain qualified education and the main purpose of the trip is to attend a work-related course or seminar.
If you receive education assistance benefits from your employer under an education assistance program, you may be able to exclude up to $5,250 annually. These benefits should not be included with the wages, tips, and other compensation shown on Form W-2, Box 1 and, therefore, are not reported on your income tax return. Your employer may report the educational assistance payments on Form W-2, Box 14. Tax-free education assistance benefits include payments for tuition, fees and similar expenses, books, supplies, and equipment. The payments may be for undergraduate- or graduate-level courses. Unlike the education expenses qualifying as business expenses, the education payments qualifying for this exclusion do not have to be for work-related courses.
For example, Mobi Bello works as a nurse in a public hospital. The hospital requires him to attend an out-of-town course to keep his nursing skills up to date. The hospital reimburses for expenses using a non-accountable plan, so the reimbursement is included in his wages and reported on his Form W-2. His adjusted gross income is $42,000. Mobi is claiming his expenses as part of his itemized deductions.
Mobi's allowed expenses for the course, before the 2% adjusted gross income limit, are as follows:
- Lodging ...........................................................................................$925
- Meals ($376 × 50%) .........................................................................$188
- Tuition ...................................................................$1,200
- Course-related books required for enrollment.............. +$180
- Total course expenses ......................................................................$1,380
- Round-trip miles driven to and from the course ...........350 miles
- Standard mileage rate ..................................................× $.56
- Total car expenses (rounded)................................................................$196
Total deductible expenses ..........................................................................$2,689
Mobi's allowable deduction is limited to the amount that is greater than 2% of his adjusted gross income, or $840 ($42,000 x 2%). He can deduct $1,849 (2,689 - $840) of the expenses.
If you are looking for a job in your current profession and can itemize your deductions, certain expenses may qualify as miscellaneous deductions. Employment agency fees, resume preparation and printing, phone calls, miles driving to and from the interview, and mailing expenses are examples of deductible items. The expenses for an out-of-town interview are deductible if you are paying for them.
If you have moved in the last year and your move was job-related, you may be able to deduct the cost of moving your household goods and your traveling expenses. Generally, your new main job location must be at least 50 miles further away from your former home than you old main job location was from your former home, and the move must have been because of your new employment. The standard mileage rate for moving is 23.5 cents per mile. You do not have to itemize deductions to claim your moving expenses.
For more information on deducting your job-related moving expenses, click here.
If you are an eligible educator and have qualified expenses, you may be able to deduct up to $250 as an adjustment to income directly on Form 1040. You can deduct the expenses that exceed this amount as an employee business expense on Schedule A.
Qualified expenses include the cost of classroom supplies such as bulletin board materials, copy paper, computer programs, books, awards for students, and extra supplies for students.
Qualifying Home Office Deductions
A home office may qualify for deduction if you used it exclusively and regularly for your trade or business. The business part of your home must be your principal place of business, a place where you meet or deal with patients, clients, or customer in the normal course of your business, or a separate structure you use in connection with your trade or business. Home office deductions cannot be more than the total wages that are related to the business use of your home. If expenses are greater than total wages, you must carry over the nondeductible expenses to the following year. As an employee, the business use of your home must be for the convenience of your employer and you cannot rent any part of your home that you use for business to your employer. Generally, home office expenses for an employee are deductible on Schedule A.
If you purchased a computer or cellular phone and you use it for business, you may be able to claim a depreciation deduction. Your employer must require you to have the phone or computer as a condition of employment and you must use them for the convenience of your employer. You must keep a record of the personal and business use of the computer or phone to determine the percentage of business use.
If you purchase certain qualifying equipment, you may deduct the cost by making a section 179 expense deduction. The maximum section 179 deduction is $25,000.
These and other unreimbursed expenses you have for work can be deducted if you itemized deductions. YOu can only deduct the expenses that are greater than 2% of your adjusted gross income. In some situations, you may first need to use Form 2106, Employee Business Expenses, to enter your expenses. If you are reimbursed by your employer for your business expenses, you first need to determine if you are being reimbursed under an accountable plan or a nonaccountable plan. Your employer should be able to tell you which plan applies to you. Under an accountable plan, reimbursements are not included in income and expenses are not allowed as a deduction. However, if your expenses are more than the reimbursement you received you may be able to deduct the unreimbursed expenses on your return. Amounts paid under a nonaccountable plan are included on your Form W-2, Box 1 and can be deducted.
Contact your neighbhorhood Jackson Hewitt office for more information or assistance in identifying all deductions for which you are eligible. Use the Office Locator available on this Web site or call 1-800-234-1040 to find the Jackson Hewitt location most convenient to you.