With the unemployment rate dropping, more folks are finding jobs.
For those that are still looking, Congress has given them some tax breaks, if they are looking for a new job that is in the same line of work. These job-hunting expenses may be deductible on the federal tax return.
Here is a summary of the rules:
1. The expenses must be spent on a job search in your current occupation. The expenses may not be deducted if you are looking for a job in a new occupation.
2. You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If the employer who hires you pays you back, this becomes income and must be reported as part of your gross income, up to the deduction.
3. You can deduct amounts you spend for preparing and mailing copies of your resume to prospective employers as long as you are looking for a new job in your present occupation.
4. If you travel to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area to which you traveled. You can only deduct the travel expenses if the trip is primarily to look for a new job.
5. You cannot deduct job search expenses if you are looking for a job for the first time.
6. Job search expenses are limited as they are a “Schedule A Misc.” deduction. This means that you can only deduct that amount, which is greater than 2 percent of your adjusted gross income.
We see that with every tax benefit there are guidelines and limitations. The most important thing is that individuals and businesses become educated in these areas so they can reduce the amount of money they leave on the table. Publication 529 has the information you need to understand all your rights under this provision. The publication is available at the IRS website, www.irs.gov.
Did you also know that if you rent out your house, vacation or primary, you do not have to report any of the income, if you rent it out for less than 15 days per year?
IRS Publication 527, at the same website listed above, spells out the rules and limitations.
Yes, if you have a unit on a golf course where there is a popular tournament, many corporations will pay a great deal of money to rent that house. I have seen corporations not only pay enough for the owners to hang out at a hotel, enjoy the tournament and pocket more than $30,000 of tax-free money.
This could cover the entire cost, or at least aid in the cost, of the owners mortgage payments. In addition, most corporations that rent these houses will purchase the necessary insurance, for the week, to cover any possible damages.
There are many other interesting tax benefits for businesses and individuals that are not discussed or popular but can have an extreme effect on the cash flow of the individual or business.
It is important that, businesses evaluate every avenue of cost savings and tax benefits to optimize their operational efficiencies.
With increased competition and rising costs, folks need to be more conscious on how to maintain and/or increase the bottom line. Sometimes the best cost savings are right in front of you but you do not see them.
Neil Shnider, MBA, CPA, is a special projects consultant who focuses on business growth through finding new markets and new products/services, increasing profits and trimming costs, for the Small Business Development Center at Florida Gulf Coast University. He can be reached at the SBDC center, at firstname.lastname@example.org or 614-582-0108.
Go to www.theshnidergroup.com for more small business information and tools.