If you are employed, you may be able to deduct a wide range of work-related expenses from your taxable income. You can even deduct certain job search expenses. If you are self-employed, an even wider range of deductions may be available to you. Limits apply to these tax deductions, however.
To deduct work expenses, your expenses must be business-related. You can't, for example, take your family to Disney World and write off the entire trip just because you met a client for lunch in Orlando. Instead, you must separate business-related and non-business-related expenses and deduct only business-related expenses. Your expenses also must be "ordinary and necessary" expenses -- expenses that are common and accepted in your particular industry and that are helpful and appropriate under the circumstances. You cannot deduct expenses that were reimbursed to you. If you are an employee, you can only deduct expenses that exceed 2 percent of your adjusted gross income.
Home Office Expenses
If you work at home, you can claim a deduction for home office expenses, as long as you devote an area exclusively to office space. The deduction applies to all expenses closely related to home ownership, including operating expenses and depreciation. The amount you may deduct is proportional to the percentage of your home's square footage that you devote to office space. If you use 10 percent of your home for a home office, for example, you may deduct 10 percent of your homeowner's expenses.
You may deduct dues you pay for membership in professional associations -- bar association dues if you are a lawyer, for example. You also may deduct subscriptions to professional journals. You may deduct tuition and fees for work-related education, even if it's not required by your employer, as long as the education serves to increase skills needed for your job. You can't deduct expenses for training to meet the minimum requirements of your job, however
Job Search Expenses
When searching for a job, you may deduct employment agency expenses, resume preparation and mailing expenses and, depending on how far you travel, travel expenses. You can't deduct these expenses if you are looking for your first job, or if you are seeking to change occupations. The total amount you can deduct is limited -- you may deduct only that portion of job search expenses that exceeds 2 percent of your adjusted gross income.
Travel and Entertainment
You generally may deduct all ordinary and necessary business travel expenses, as well as 50 percent of the cost of business dining and entertainment. In case of a tax audit, you must keep records indicating the business purpose, the names of the people you entertained or dined with, and the date and location of the event. If you drive for business purposes, the IRS allows you to deduct either your actual expenses or a standard IRS mileage rate -- 55.5 cents per mile in 2012.
You may deduct business-related insurance premiums that cover fire, storms, accidents, theft and even bad debts. You also may deduct malpractice and other professional liability insurance premiums. If you are an employee, you may deduct group health insurance if you pay the premiums yourself. If you take the home office deduction, you may deduct your homeowner's insurance premiums. You cannot deduct premiums for a policy that covers lost earnings, or for a life insurance policy that names you as a beneficiary.
- H&R Block: Tax Tips & Calculators
- Internal Revenue Service: Business Expenses
- Internal Revenue Service: Deducting Business Expenses
- Internal Revenue Service: Employee Business Expenses
- Internal Revenue Service: Deducting Travel, Entertainment and Gift Expenses
- Internal Revenue Service: Seven Tax Tips for Job Seekers
David Carnes has been a full-time writer since 1998 and has published two full-length novels. He spends much of his time in various Asian countries and is fluent in Mandarin Chinese. He earned a Juris Doctorate from the University of Kentucky College of Law.