Teachers, truckers and others who pay to work
NEW YORK (Reuters) - Parents across the United States met the start of a new school year by dropping off their children along with mounds of supplies: crayons, folders, hand sanitizers, paper towels and much, much more.
But with school budgets crunched, those supplies bought by parents are still not enough. To make up the slack, U.S. teachers have to reach into their own pockets. Last year, American teachers spent an average of $485 on school supplies, according to the 2013 Retail Market Awareness Report from the National School Supply and Equipment Association. That comes to $1.6 billion in total.
This spending is ingrained and prevalent - 99.5 percent of teachers spend out-of-pocket on school supplies, the NSSEA survey found, and there is even a line item for it on federal income tax forms. Teachers in grades K-12 can claim up to $250 each in unreimbursed expenses. They can claim any amount over that on a separate line, as an unreimbursed employee expense, but they are then subject to the same rules as everyone else - only the amount above 2 percent of adjusted gross income is deductible.
There are also special rules about deductions for clergy and members of the military, but the bulk of out-of-pocket spending for salaried employees actually comes from other professions.
No matter what your career, it pays to be more savvy about what expenses are reimbursible and what ones are not.
In 2010, the last year of data available, taxpayers claimed some $72 billion in unreimbursed employee expenses, according to data from the Internal Revenue Service. The largest number of claims came from those with income between $100,000 and $200,000 - more than 4 million returns, totaling $19 billion in expenses, or roughly $4,700 per return.
This is partially because lower-income workers tend to take the standard deduction and pay more in taxes than they might have to, says Lisa Greene-Lewis, TurboTax's lead certified public accountant. Another reason is that in higher-income jobs, the expenses for travel, continuing education and business meals add up a lot faster than stacks of construction paper.
Here are some of the other ways jobs can cost you:
UNIFORMS AND ACCESSORIES
While a business suit might feel like a uniform, the cost to buy it and to occasionally send it out for dry cleaning is not deductible. But for police officers, firefighters, nurses and tradesmen, uniforms are often not provided by the employer, or there are specialty boots and shoes that are the employee's responsibility. Those specialty uniforms - that you would not wear in everyday life - are deductible as unreimbursed expenses.
Mileage is one of the top items claimed as an unreimbursed deduction, says Mike Habib, a tax adviser with his own practice in Whittier, California. It is not just salesmen who are in their cars a lot. Habib says that among people who claim mileage, 20 to 30 percent of their total driving time is business-related, not counting commuting. A key detail to avoiding an audit with this deduction is to make sure that your employer would not cover mileage - even partially - if you filed an expense report. "The government will not pay you for it if you chose not to file an expense report," he says. Another tip: do not claim a round number.
Financial advisers, accountants, doctors and other professionals often need continuing education to keep their licenses in force, but it is not always covered as an employee expense. The costs for these courses - including travel and meals - can add up (while sometimes providing a deductible trip to a lovely locale). Habib consulted with a nurse who took a continuing education course in Japan. While her employer gave her the time off to make the trip, it did not cover her expenses, which amounted to $8,000. When she asked Habib about claiming the expense, he considered it legitimate because it was necessary for her career development.
THAT BIG MISCELLANEOUS CATEGORY
Not all business travel gets reimbursed, nor do all meals with clients or gifts for clients (such as the wine and throw pillows real estate agents give their customers). Then there are magazine and newspaper subscriptions and even - for people involved in media - the cost of their cable TV service. Tax accountant Stephen Jordan, who practices in Salem, New Hampshire, suggests keeping detailed records in a journal.
"You have to document who, what, why, when and how," he says. "The IRS is getting really strict."
ALL OF THE ABOVE
One profession that pulls all of these elements together at once is long-distance trucking. For those who are employed by a company, as opposed to working as independent contractors, out-of-pocket expenses can range from $7,000 to $12,000 on a $50,000 salary, says Jim Stowell, a tax accountant who owns five H&R Block franchises and also a trucking company in Burlington, Wisconsin.
Drivers incur expenses for gloves and boots, equipment for their vehicles, a per diem expense for meals on the road, license fees and also road trip charges like off-route tolls. "It's a big chunk of their income," says Stowell. "Some don't bother to file for it and take the standard deduction, but we show them the difference and encourage them to take the deductions." Indeed, for that typical trucker, the difference between itemizing and taking the standard deduction of $6,100 for an individual person filing saves roughly $1,200 in taxes due.