A closer look at fed deductions

Many un-reimbursed employee expenses can be counted as miscellaneous deductions if you itemize on Schedule A. As a federal employee you're entitled (like other taxpayers) to deduct business expenses if they exceed 2 percent of your adjusted gross income.

Some expenses that you may not have considered are training and education expenses, and job search expenses. Here's a closer look.

Training and Education

Training and education expenses are tax deductible if they are incurred to maintain or improve the skills used in your current profession or to meet the requirements of your employer or the law to retain your salary, status or employment. The cost is tax deductible even if the education or training may lead to an advanced degree.

Your education and training expenses are not tax deductible if they qualify you for a profession or they are incurred to meet the minimum educational requirements in your present employment or profession — such as continuing education in order to maintain your status as an accountant, attorney, etc.

You also can deduct transportation expenses when traveling from the general area in which you live to a training facility that is outside that general area, or between your place of employment and a school within your local area. So, if you come home from work and then go to school, you can deduct the expense of traveling from home to school and back or the expense of traveling directly from work to school, whichever is less. You can't, however, deduct the cost of local transportation between your home and school on a day you have off from work.

Job Hunting Expenses

If you travel out of town to look for a new job in your present occupation, you can deduct travel expenses to or from the out-of-town location. However, this only holds true if the primary purpose of your trip is to look for a new job.

You can deduct 34.5 cents per mile for all miles traveled (if you travel by car) in 2001 and 36.5 cents in 2002. To deduct these expenses, you have to file Form 2106 with your tax return.

You can deduct expenses incurred while looking for a new job in your present occupation regardless of whether you land a new job, but you cannot deduct expenses looking for a job in a {ital}new{end ital} occupation even if you do get the job. If you're unemployed, the kind of work you last did is considered your "occupation" when determining whether job search expenses are tax deductible.

Examples of expenses incurred while searching for a new job:

* Resume preparation (drafting, typing, printing, mailing, faxing).

* Employment agency fees.

* Executive recruiters' fees.

* Portfolio preparation costs.

* Career counseling to assist you in improving your position.

* Legal and accounting fees you pay in connection with employment contract negotiations and preparation.

* Advertising.

* Transportation costs to job interviews.

* Long-distance calls to prospective employers.

* Newspapers you purchase to read the employment ads.

* Other business publications you purchase to read the employment ads.

* Half of your meals you pay for that are directly related to your job search.

If you take a trip away from home to look for a new job, your expenses for traveling, lodging, meals (50 percent of the cost), etc., are deductible only if the primary purpose of your trip is to look for a job. To substantiate the purpose of your trip, keep a daily log of your interviews, application efforts, etc. The IRS compares the amount of time you spend looking for a job vs. the amount of time you spend on personal activities to determine whether looking for a job was the primary purpose of your travel.

Other Deductions

In addition to the above-mentioned expenses, you can also deduct:

* Costs to produce or collect income that must be included in your gross income.

* The cost to manage, conserve or maintain property and the cost of getting help to produce such income.

* The cost to determine, contest, pay or claim a refund of any tax.

* The cost to appraise the extent of a casualty loss or a charitable contribution.

* The cost for clerical help and office rent in caring for your investments.

* Depreciation of your home computer to the extent that it is used for investments.

* Fees to collect interest and dividends.

* Investment fees and expenses.

* Legal fees related to producing or collecting taxable income, such as getting tax advice or fees incurred in order to keep your job (taking a case to the Merit System Protection Board or the courts).

* Safe-deposit-box rental.

* Service charges on dividend reinvestment plans.

* Tax advice and preparation fees, including electronic filing fees.

* Books used on the job.

* Malpractice and professional liability premiums.

* Subscriptions.

Less Than 2 Percent

So far, we've discussed deductions that are subject to the 2 percent of adjusted gross income threshold. However, you can take some deductions right against your taxable income without meeting the 2 percent of AGI test. Such deductions include:

* Impairment-related work expenses if you're disabled. For example, voice recognition software, devices, etc.

* Gambling losses, but only to the extent of gambling winnings.

* Federal estate tax on inherited income.

If any of the items mentioned in this collection of potential tax-deductible expenses sounds as if it might apply to you, check it out with your accountant or tax adviser.

Zall is a retired federal employee who since 1987 has written the Bureaucratus column for Federal Computer Week. He is also a certified internal auditor and a registered investment adviser. He can be reached at [email protected].


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