Every U.S. taxpayer struggles with ways to reduce their tax liability. Two ways to do this include increasing deductions and taking advantage of available tax credits. There are work-related expenses you may not have realized you could deduct from your taxes. If you are the owner of a small business, there are also tax credits you can use to lower your tax liability. Here are just a few suggestions.
Work-related Educational Expenses
Under certain circumstances, expenses for education that is work-related can be deducted from your income taxes. This is true whether or not you work for someone else or are self-employed. There are certain minimum guidelines that must be met in order for the educational expenses to qualify for a deduction.
- Your employer or the law requires you to take the course in order to maintain your license, job or salary level and it serves a real business purpose.
- The education is required in order to improve, or at least maintain, the skills required for your job.
The education must be related to your current job status. If the purpose of the education is so you can start a new career or get a different job, your expenses will not qualify for a tax deduction. There are strict rules for deducting these expenses.
One example given by the IRS is a teacher who is required to take certain courses every year in order to advance on the salary schedule of the school district. Those courses qualify for a tax deduction even if they lead to an advanced degree which, in theory, could be used to get a different job. Courses designed to help the teacher be a better teacher also qualify. There are many other examples you should review before deciding to take this deduction.
If the education qualifies, some of the items you can deduct include:
- All tuition and fees, plus books and supplies, that are required for the course
- Some travel costs
- Costs of paying someone to type a paper, lab fees and other research related costs
Miscellaneous Fees, Subscriptions and Other Expenses
Many miscellaneous expenses qualify as tax deductions if you are not reimbursed by your employer. The expenses must be considered “ordinary and necessary” and be directly related to your business or your employment. Examples of ordinary and necessary expenses include:
- Subscriptions to trade journals and other professional magazines
- Membership fees in certain organizations related to your job
- State or federal licensing fees
- Premiums for malpractice insurance
- Passport fees for a required business trip
- Dues for belonging to a union or membership in a professional society
Tax Credit for Small Business Employers
If you are the owner of a business and pay half or more of the health insurance premium for your employees, you may qualify for a tax credit if you meet the following qualifications:
- You have fewer than 25 full-time equivalent (FTE) employees
- The average salary earned by your employees is less than $50,000
There are, of course, specific guidelines to follow and mathematical calculations to use. If you have 10 full time employees and 10 half-time employees, you have 15 FTE employees. Divide the total wages you pay by the number of your FTE employees to get your average salary. The tax credit can save you thousands of dollars a year in taxes so it is well worth doing the simple math.