Paying taxes is never pleasant, and the experience can be even worse when you are unemployed and trying to hold on to every dollar of your savings. But by judicious tax planning and careful application of the rules on deductions, you stand a good chance to get some much needed savings while filing your taxes.
Even if throughout last year you did not have any employment, you might still have to file taxes, as unemployment benefits are taxed. On the other hand, if you received an income in excess of $9,350 during the fiscal year or if you were self employed and earned a profit in excess of $400 then you are anyway legally bound to file a return. Yet another situation where you would have to file taxes is if you expecting a refund from the IRA, irrespective of whether you are employed or not.
Here are some benefits that you should keep in mind while filing your taxes this year.
Deductions Related to Your Job Search
Unemployed taxpayers are entitled to tax deductions for expenses they incurred while scouting for jobs. The expenses that you can deduct from your income include travel, telephone bills, printing, and postage. However, there are some conditions attached to this benefit. First of all, each deduction that you make should exceed 2% of your total income. Secondly, you need to keep the supporting receipts to make these claims.
Exemption of Unemployment Benefits
The IRA has permitted unemployed taxpayers to keep the first $2,400 from unemployment benefits out of the tax net. This is a one time benefit that has been introduced to give some relief to those without a job. But remember that you will have to do all the calculations and make sure that they are included when you file taxes.
Benefits Related to Medical Expenses
If you are withdrawing money from your 401(k) for medical expenses, you no longer have to pay a penalty tax. And if you are above the age of 55, you can make withdrawals from your 401(k) for other purposes as well.
Tax laws are governed by the state of the economy, and the government makes amendments from time to time mainly with a view to giving relief to tax payers. With the unemployment rate hovering close to 10%, it is no surprise that this year the government has come out with some benefits for people without a job. So go ahead and take advantage of these provisions.