In honor of Labor Day I thought I would discuss job-related deductions.
An employee business expenses is an “ordinary” and “necessary” expense of your job. An “ordinary” expense is one that is common and accepted in your trade or profession and a “necessary” expense is one that is helpful and appropriate. An expense does not have to be required by your employer or law to be necessary.
Deductible expenses include:
* Job related use of your car – but not commuting back and forth to work. You can deduct either a proportionate share of the actual costs of maintaining your car or a “standard mileage allowance”. For 2007 the standard mileage allowance is 48½ cents per mile. See my Thursday, November 27, 2006 posting “Ask The Tax Pro” (from my old blogging address), my posting “Ask The Tax Pro – Mileage Reimbursement”, and the IRS Fact Sheet on “Car and Truck Expense Deduction Reminders” for more detailed information.
* The cost of looking for a job in your present line of work. This includes fees paid to employment agencies and consulting firms for securing a job, preparing a resume or career counseling, the cost of typing, printing and mailing resumes, telephone calls to set up interviews, newspapers and periodicals purchased for employment ads, and round-trip travel or transportation to job interviews, plus lodging and meals (at 50%) if away from home overnight. If you drive you can deduct 48½ cents per mile for 2007. Expenses to look for work in a new trade or field are not deductible; neither are the costs of finding your first job after graduating from school. You do not have to actually get a new job to be able to deduct the expenses.
* The cost of job-related education. For a detailed explanation see my posting on “Is An MBA Deductible”. If you use your car to travel to the education you can deduct at 48 ½ cents per mile for 2007 in lieu of actual expenses, plus parking and tolls. You can also deduct registration and travel expenses that relate to attending a job-related annual convention or conference, such as the NJ teacher’s convention usually held each year in Atlantic City or, in my case, the NATP National Conference or the NSTP Annual Convention.
* The cost and cleaning of uniforms and work clothes. To be deductible they must be required as a condition of employment and not adaptable to everyday wear. Items that qualify are uniforms of police officers, firefighters, nurses, transportation workers (air, rail, bus), and professional athletes, special jackets, shirts, ties, etc that feature a company logo (i.e. the gold Century 21 jacket), and special protective clothing such as safety boots, hard hats and work gloves.
* Job-related use of your telephone. This includes the cost of actual local (if identified on the phone bill) and long-distance business phone calls, extra features such as call waiting and call forwarding, and a second phone line in your home used for business. The cost of basic phone service for the primary phone line in your home is not deductible. You can also deduct the cost of a pager and cell phone used for business. Be advised that a cell phone is considered to be “listed property” and require special record keeping to substantiate a deduction.
* Union dues, initiation fees and assessments and dues to professional organizations. You can deduct assessments for benefit payments to unemployed union members but you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits or contributions to a pension fund. You cannot deduct amounts you pay to a union or professional organization that are related to certain lobbying and political activities. The organization will generally report the percentage of dues that are, or are not, deductible.
* Small tools and supplies used at work.
Unfortunately job-related expenses, a “miscellaneous” deduction on Schedule A, are deductible only to the extent that your total miscellaneous deductions exceed 2% of your Adjusted Gross Income (AGI). Plus such miscellaneous expenses from Schedule A are not deductible in calculating the dreaded Alternative Minimum Tax (AMT). Excess job-related expenses may actually trigger AMT.
You may want to review IRS Publication 529 (Miscellaneous Deductions).