Tax Prep: Often Overlooked Deductions
This week we’re going over taxes (they’re due April 17th!). If you have a simple tax return, you can check out these free options: Turbotax or Credit Karma. To get as much $ as possible back, here are some often overlooked deductions (for self-employed, rules slightly vary):
1) Moving expenses.
Did you just get a new job, pack up all your stuff, and move cross country (and along the way spent a ton on services like Lugg)? You might be able to get some of that back if it meets the requirements.
To write off relocation, you must meet three requirements:
✔️ Your move must be job related
✔️ You must meet the distance test: For the distance test, the location of your new job must be at least miles farther from your previous residence than your last job was. For example, if you lived 15 miles from your old job, your new job must be at least 65 miles from your old home before you can deduct moving costs (15+50). The distance is calculated using the shortest of the most commonly traveled routes.
✔️ You must pass a timing test: Moving expenses must be incurred within 1 year of starting at a new workplace and you must work full time at the new location for at least 39 weeks during first 12 months there. The worked weeks don’t have to be consecutive or with the same employer. You can still deduct moving expenses if you haven’t met the timing test by the time you file taxes.
If your new employer reimburses you for some or all of your moving costs, you can’t deduct those.
What can you deduct: cost to move household and personal goods, limited storage and insurance fees, utility connection and disconnection charges, travel costs to get pet to new home, some lodging and travel costs near new and former homes, standard mileage rate for cars.
2) Job-hunting costs.
Back to back interviews? If you have been on the search for a new job, you might be able to deduct costs related to the job, including resume help, travel expenses, etc.
To itemize job-hunting costs you must meet these requirements:
✔️ Must be finding work in the same field or a previous field where you were currently employed
✔️ No “substantial” break between jobs
✔️ Not be a recent graduate (e.g., you need to have a job before you find a job).
What can you deduct: You can write off employment agency fees, resume services, printing and mailing costs of search letters, want-ad placement fees, telephone calls, travel expenses (including out of town).
Where is it on the tax return: “Miscellaneous itemized deduction”
3) Educational expenses.
Congrats on taking that coding course on the side to get better at your job! Luckily, our government offers lots of incentives for continuing education.
If you’re an employee you can deduct the cost of education that:
✔️ Maintains or improves the skills required for your new job and is required by your employer
You cannot deduct expenses if they aren’t related to your job, qualifies you for a new trade or profession, or is required to meet minimum education requirements when you first got the job.
What can you deduct: amounts paid for fees, tuition, and other related expenses for eligible student. It DOES NOT cover room & board, insurance, medical expenses, transportation, personal, family, or living expenses.
Where is it on the tax return: “Miscellaneous itemized deduction”; potentially also check out American Opportunity Credit (college classes; until 2017 unless extended) and Lifetime Learning Credit (college classes).
Looking ahead due to the new tax laws, we will be saying hello and goodbye to lots of new changes (including tax brackets and deductions). Don’t worry, we will be here to walk you through the madness.
AND… if it makes you feel better, geniuses don’t like taxes either:
“The hardest thing in the world is to understand the income tax”
— Albert Einstein
Startups where you can buy a home with no down payment
Owning Your Power at Work
Marie Kondo Your Finances
What is an IPO?
My First Intro Call with Snowball
My Money Story: Mariam Razzaghi
Why Giving My Family $300 is a Must
How to Spot Life Insurance Scams
The Drunk Shopping Industry
The Millennial's Guide to Retirement