Tax Strategies for the UnemployedPublished:
Are you unemployed? If so, there are many tax strategies that you may want to consider following. Understandably, this is a tough time in your life and you do not want to make things worse by owing additional money to the IRS. Any tax strategy that can help lower your tax liability is one that you should definitely consider.
Here are several tax strategies that unemployed people should consider:
Unemployment compensation is generally considered taxable income. However, if you received unemployment compensation in 2009, the first $2,400 can be excluded from your tax return. This is a tax strategy that many people are unaware of because it is a new rule that has recently taken effect. But remember that you need to do the math for yourself ? your state will not deduct it for you. This benefit won’t be around long, so take advantage of it while you can.
Have you been spending money searching for employment? If so, these expenses are considered tax-deductible. If you itemize deductions, you may be able to deduct your job hunting expenses. That being said, you also need to be aware of the rules before you implement this tax strategy. For instance, the tax deduction must be greater than 2% of your adjusted gross income (AGI). Some of the most common tax deductions are for the following expenses: long-distance calls, travel to/from interviews and meetings, postage, and printing costs. Always be sure to save and organize your receipts in case of a tax audit.
Consider any tax credits that you may now qualify for. Since your income (on unemployment) is lower than it would be with a full-time job, you may be eligible for certain tax credits. Utilizing applicable credits is a tax strategy that’s overlooked by many people. If your income dips, you may qualify for the Earned Income Tax Credit. Other credits that you may be able to take advantage also include the Child Tax Credit and the Additional Child Tax Credit.
If you have finally found a new job, you may have to relocate for it. While this is a big change (and a big expense), it can be offset on your tax return. You can deduct moving expenses related to employment as long as your new job is (at least) 50 miles farther away from your old home than your previous job was. You are not required to itemize your deductions to benefit from this option.
Unemployment often times leads to financial distress. Although your income may have changed, you should consider the various tax strategies that can help better your situation. The four tax strategies above apply to millions of people. Ask yourself if you’re able to benefit from these tax strategies or any others.