It’s always a pleasant surprise to find ways of saving on taxes. Did you know that if you paid for work related expenses out of your own pocket, you may be able to deduct the amount of those costs that is more than 2% of your adjusted income? Adjusted income is your total wages plus other income such as interest and alimony, less adjustments like student loan interest and retirement contributions, and is different from taxable income.
Here are 5 facts you should know:
- 1.Only unreimbursed ordinary expenses can be claimed. These must be common and accepted in your industry and necessary and appropriate for your business or work. They can include:
- - Supplies and tools
- - Business use of your car
- - Business meals and entertainment
- - Business travel
- - Use of your home for business purposes
- - Work related education
- - Uniforms and clothes you wouldn’t wear in your leisure time
- 2.You must keep proper records. You may use an account book, diary, statement of expense or similar. You also need to keep the documentary evidence that will support each element of the expense such as receipts, canceled checks or bills.
- 3.K-12 teachers may be able to claim up to $250 of expenses. Examples include supplies, books, equipment and other materials used in the classroom. They must be claimed as an adjustment on your income tax return rather than an itemized deduction.
- 4.You must report your expenses on the correct forms. In most cases, form 2106 should be completed. If you use the standard mileage rate for claiming vehicle expenses (57.5 cents per mile in 2015), you can use 2106-EZ. Once you’ve calculated your allowable expenses, you should list the total on IRS Schedule A as a miscellaneous deduction.
- 5.You may be able to deduct some of your costs as a charitable contribution if you work as a volunteer for a qualified charity.
Some people find it confusing to figure out what qualifies as a deduction or the correct form to submit. A qualified tax preparer can help you complete your income tax return, calculate all of your possible savings and ensure you receive possible refunds quickly.
At Poe's Accounting Services and Lightning Tax Services, we specialize in simplifying our private and corporate client's financials and taxes, taking the anxiety and confusion out of the accounting process.