My Favorite Tax Deduction
December 13, 2010When you’re a business owner or an independent contractor, of course you can write off everything associated with your business. But what if you aren’t? I have to say that I never really wanted to run my own business– I love being an employee with my W2 at the end of the year. An entrepreneur? Not me. I pride myself at being an “intraprenuer” where I enjoy creative projects like writing and being the host of “your money minute,” as well as educating employees to become financially secure and helping the company to grow.
However, many employees are unhappy at tax time because they don’t enjoy any extra tax breaks. That is not necessarily true. There is a very special tax form called the 2106 that many people either don’t know about or definitely underutilize. This form should be framed and put in my office above my desk. Employees can use the 2106 to write off employee business expenses.
Here is how it works:
You can write off unreimbursed business expenses that are over and above 2% of your adjusted gross income. So if your adjusted gross income is $50,000 then anything you spend over $1000 ($50,000 x .02 = $1000) can be written off. You might be saying to yourself, “I don’t spend over a thousand dollars on business expenses!! Are you kidding me?!” Well, no and I’ll bet you do.
Think about it. Do you have a Blackberry or an iPhone with a basic service package, text and data? Is it more than $80 per month? Mine is. We don’t have company paid cell phones but in my case, I feel that without it, I wouldn’t perform as well on my job. So I pay for it and if you do also, there is your $1000 threshold. Anything above that, you can now write off.
Now start thinking about what else you have.
Do you:
- Subscribe to magazines or newspapers that are trade publications?
- Purchase books?
- Ever go over your travel allowance? (It doesn’t take much when waters are $4 at the airport or if you actually want to eat a meal in New York City.)
- Take classes and pay tuition to further your professional skills?
- Attend webcasts?
- Buy office supplies that aren’t reimbursed but used for business – anything from printer cartridges at home to print office supplies, memory sticks for your lap top, upgrades to your phone, a bluetooth, etc?
- Have unreimbursed personal miles on your vehicle?
You may be able to write off these expenses that are over the 2% threshold. The bottom line is if you are making the expense anyway to either further your education and knowledge or to perform better on your job, then you might as well write it off! Whether you do your own taxes or you have an advisor, learn about the form 2106 and let Uncle Sam help you out. Remember, in this case, the IRS is your friend.
Here are some links for more information: